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Full text of "Analysis of PSRO review costs"

c 



m 19 



Analysis of 
PSRO Costs 



January 31 , 1980 

MANUALS 

RA U.S. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE 

399 I 




HEALTH CARE FINANCING ADMINISTRATION 
HEALTH STANDARDS AND QUALITY BUREAU 



9 



MEMORANDUM 

TO Planning and Conditional PSROs 

Statewide Councils; Regional 
PSRO Project Officers 



DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE 

HEALTH CARE FINANCING ADMINISTRATION 
Office of the Adminlstiatoi 

DATE: January 31, 1980 
Technical Assistance Document No. 19 



FROM : Administrator 



SUBJECT: Analysis of PSRO Review Costs 



This document outlines one method which can be used to analyze PSRO 
review costs. It details an analysis of PSRO review cost/spending 
patterns prepared by Office of Professional Standards Review Organiza- 
tions (OPSRO) staff using that method. This analysis was previously 
shared with PSRO project officers who, in turn, shared portions of 
the materials with PSROs for use in the ongoing examination and 
evaluation of their review systems and costs. Through comparative 
unit cost analysis, PSROs and hospitals can determine ways to effect 
cost savings using their current review procedures or decide to develop 
alternative review systems. 

OPSRO is committed to helping PSROs reduce their review costs while 
continuing to carry out effective review systems. This technical 
assistance document represents part of that commitment. OPSRO is 
pursuing the development of additional cost models. Any questions 
raised by the material in this technical assistance document can be 
directed to Geraldine Ellis, Director, Division of Peer Review. 




Leonard D. Schaeffer 



Attachment 



o 



ANALYSIS OF 
PSRO REVIEW COSTS 



Contents 

Page 



I . Introduction 1 

II. Purpose 1 

III. Scope and Limitations 2 

IV. Analysis Techniques 3 

V. Format of Analysis 12 

VI. Delegated Review Costs 13 

VII. Nondelegated Review - Part II Costs 53 

VIII. Areawide Review - Part III Costs 62 

IX. Conclusions and Recommendations 70 




L 




I 



1 



I. Introduction 

In August 1978, PSROs were advised by the draft transmittal "Reduction 
of PSRO Hospital Review Costs" of the need to reduce unit hospital 
review costs to a negotiated fixed rate of $8.70 on the average. 
Varying degrees of cost cutting will have to be made by nearly all 
PSROs to meet the $8.70 national average. 

PSROs have expressed concern as to what steps need to be taken to 
reduce the unit cost of review. For example, some PSROs have asked 
for guidance in determining the percentage of cases which must be 
exempted from review to lower the overall \init rate. Other PSROs 
have asked about the implications of the lower unit cost rate on 
review coordinator productivity and on review staff job security. 
Underlying these concerns has been the more general concern that 
decreased funding for review may lessen the effectiveness of the 
review system. 

This document has been prepared by OPSRO staff to help PSROs and 
project officers analyze PSRO cost/ spending patterns and make deci- 
sions as to the review system modifications necessary to reduce the 
unit cost of review. In brief, this document presents one method 
for analyzing PSRO cost/spending patterns and defines a model for 
apportioning the $8.70 unit cost available for review between the 
hospital for conducting delegated review and the PSRO for carrying 
out its areawide review activities (e.g., profile analysis, monitor- 
ing, and areawide Medical Care Evaluation studies [MCEs]). This 
model assumes that $8.70 is the negotiated unit cost rate for 
delegated review in the PSRO area. The $8.70 is apportioned so that 
$6.45 is set aside for delegated review and $2.25 is retained by the 
PSRO for Part III areawide costs. Although the model does not deal 
as thoroughly with nondelegated review costs, the principles upon 
which the delegated model was constructed would apply. The model 
presented is an example only and is not to be construed as the only 
way to apportion review costs. 

HSQB is pursuing the development of additional models and analytical 
methodologies to assist PSROs and regional offices in assessing and 
evaluating cost/ spending patterns and refining review systems to meet 
the challenges of conducting effective and efficient review at the 
lower cost rate. These other models should be developed during fiscal 
year 1980. 



II . Purpose 

The purpose of this technical assistance document is to describe the 
analytic techniques used by OPSRO staff to examine the cost/spending 
patterns of a sample of PSROs and delegated hospitals. As a result 



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of this examination, one model for apportioning the national average 
review cost of $8.70 was developed. The model described in this docu- 
ment is as follows: 



The $8.70 was chosen as a present guideline figure because it is the 
desired national average. Some PSROs and delegated hospitals will 
conduct review for less than $8.70 because different review plans 
incur lower unit costs, and some PSROs are being funded differently 
depending on local needs, variations, etc. 

The model is not meant to be a "cookbook" approach to reducing costs. 
Rather, it is a guide to keeping costs within acceptable limits. Its 
chief value is not in the specific cost determination but in the 
analytic methods which can assist PSROs in implementing a sound, cost- 
effective review plan. 



III. Scope and Limitations 

OPSRO staff analyzed the review costs of delegated hospitals (Part IV, 
HCFA form 153), nondelegated costs incurred by the PSRO (Part II, HCFA 
form 151), and PSRO areawide costs (Part III, HCFA form 151). Data from 
HCFA form 153 represent estimated 1978-1979 delegated review costs. 
Data from HCFA form 151 represent actual 7/1/77 - 6/30/78 review costs. 
PSRO managerial costs (Part I) were not considered. 

In the analysis of delegated hospital costs, data limitations affected 
the sample in several ways. For example, no delegated hospitals were 
included from HEW Regions VI or VIII, and there was limited representa- 
tion from Regions IV and X. While these data may have been available, 
they were inaccessible at the time. In addition, the small number of 
153s from hospitals admitting more than 10,000 Federal patients limited 
the number of hospitals of that size represented in the sample. Thus, 
while we initially expected to have 20 hospitals in each sample size 
group, there were considerably less than 20 in the group of largest 
hospitals. In that part of the study dealing with Part II and III 
PSRO costs, the selected PSROs were generally three or four years old 
and 100% implemented. 

Finally, no claim is made regarding the statistical representation of 
the samples used. However, hospitals and PSROs of differing sizes and 
geographic locations were used in order to present as comprehensive a 
picture of review costs as possible. 



Delegated Hospital Review Unit Cost 
(PSRO Part IV Costs) 



$6.45 ($5.00 con- 
current review; 
$1.45 MCEs) 



PSRO Areawide Review Unit Cost 

(PSRO Part III Costs) 



2.25 
$8.70 



-3- 



The present paper deals with a limited number of cost components for 
each type of review. The emphasis on only certain cost elements is 
not meant to imply that the elements omitted from analysis are negli- 
gible in an absolute sense. Study topics were selected on a relative 
basis; selected cost elements generally represent or have been con- 
sidered to represent the major factors in total review costs. 

It should be noted that while some cost elements (e.g., physician •' 
advisor costs, training costs) are generally minor in relation to 
total costs, these same elements may be of considerable consequence 
in certain PSROs and/or delegated hospitals. While it may not be 
necessary to do elaborate analysis with these less costly elements, 
it is important to look at them to insure that they are within expec- 
tations. For example, most travel costs were similar. However, 
examination found one delegated hospital in an urban PSRO area that 
filed $3,000 in travel expenses. PSROs and regional offices should 
be careful to "flag" instances where costs are significantly different 
from other hospitals or other PSROs. In addition, even in a situation 
where these costs are seemingly insignificant, when they are considered 
all together, their sum may be noteworthy. 

A more important cost element, fringe benefits for review coordinators 
and technical/ support personnel, was not included in the analysis of 
review coordination unit cost and technical/ support personnel unit cost 
because it was difficult to determine from the cost data collection 
forms (HCFA 151 and 153) what portion of the fringe benefits cost 
should be apportioned to the review coordinators and what portion to 
technical/ support staff. However, fringe benefit costs are included 
in the calculation of total concurrent review and MCEs unit costs. 
PSROs and delegated hospitals can and should consider the cost of 
employee fringe benefits in determining the unit cost of needed 
personnel and establishing focused review systems or in other measures 
designed to cut costs. PSROs and delegated hospitals should utilize 
the costs of fringe benefits in calculating the unit cost of personnel 
elements . 



IV. Analysis Techniques 

A variety of basic techniques was used in examining PSRO review costs 
and constructing the model. These techniques include the use of a com- 
mon unit of comparison, unit cost, apportionment, rank order, and some 
measures of central tendency — range, mean, median, and mode. 

A. Use of a Common Unit of Comparison 

The use of a common unit of comparison was found to be the most 
important factor in carrying out the analysis. Defining a base or 
common denominator from which comparisons could be made was instru- 
mental in obtaining meaningful measures of the appropriateness of 
costs . 



-4- 



Preliminary analysis of data at the PSRO level revealed difficulty in 
examining aggregate information concerning the cost of review of 
Federal patients. Instead, hospital level data appeared to be a more 
appropriate base from which to examine costs. 

Hospital workload (i.e., the number of Federal admissions) provided 
the unit of comparison for delegated hospital review. Thus, delegated 
hospitals were considered equivalent based on similar numbers of Federal 
admissions and were grouped accordingly. However, it must be noted 
that while two hospitals can be equivalent based on numbers of Federal 
admissions, they may be very different in regard to other factors such 
as number of beds, number of total (Federal and nonfederal) admissions, 
or location (rural, suburban, or urban setting). Federal patient work- 
load also provided the unit of comparison for the analysis of nondele- 
gated review. 

For the analysis of areawide (monitoring) costs, common units of com- 
parison included the number of Federal discharges, the number of dele- 
gated discharges (i.e., the number of Federal discharges from delegated 
hospitals), and the number of delegated hospitals. 



B. Grouping According to the Unit of Comparison 

The selection of delegated hospital size categories based on the 
number of Federal admissions: 

o reflects intervals within which an adequate number of hospitals 
would fall; 

o reflects representation of a wide range of hospital sizes; and 

o forms internally homogeneous and, simultaneously, externally 
distinct groups. 

Six size categories were chosen, and each category included hospitals 
with annual Federal admissions within an interval of 300 (i.e., ±150): 

Group A: Small hospitals (under 1,000 Federal admissions) 

Group B: Circa 1,000 (i.e., 1,000 ± 150; or 850 to 1,150) Federal 
admissions 

Group C: Circa 2,500 (i.e., 2,500 ± 150; or 2,350 to 2,650) Federal 
admissions 

Group D: Circa 4,000 (i.e., 4,000 ± 150; or 3,850 to 4,150) Federal 
admissions 



-5- 



Group E: Circa 6,000 (i.e., 6,000 ± 150; or 5,850 to 6,150) Federal 
admissions 

Group F: Circa 10,000 (i.e., 10,000 ± 150; or 9,850 to 10,150) Federal 
admissions . 

A total of 128 hospitals from 106 PSROs was included in the examination 
of delegated hospital costs. Group A consisted of 26 delegated hospitals; 
Group B, 28; Group C, 21; Group D, 19; Group E, 21; and Group F, 13. 

Each hospital was numbered to provide it with a unique code (e.g., A2 
is no. 2 of group A; E19 is no. 19 of group E) for working and manipu- 
lative purposes. The codes used for hospitals and PSROs are in no way 
related to any PSRO program codes. Virtually all the hospitals in the 
sample groups A-D fell within the chosen numerical intervals, yet less 
than 20% in groups E and F did so. Thus, the criteria for groups E 
and F had to be made more flexible in order to include more hospitals 
in these groupings. This phenomenon seems related to the existence of 
a fewer number of larger hospitals nationally. 

Because nondelegated review costs are reported by PSRO, the analysis 
of nondelegated costs did not utilize the technique of grouping non- 
delegated hospitals into categories as was done with delegated hospitals. 
Instead, nondelegated review costs were examined by PSRO. 

All available HCFA 153 forms (rendering estimated 1978-79 information) 
were examined in order to select delegated hospitals for each size group. 
A hospital was not included unless the number of Federal admissions and 
relevant cost data were included on its submitted form 153. In addition, 
hospitals were chosen so as to include a diverse group of PSROs from 
different geographic regions. Similarly, in selecting PSROs for the 
analysis of nondelegated and areawide review costs, an attempt was 
made to include PSROs from different geographic areas and rural/urban/ 
suburban environments. In addition, PSROs with various mixes of 
delegated and nondelegated hospitals were chosen. 

In order for this method of examination to be maximally useful, dele- 
gated hospitals within a region, svib-region, PSRO area, etc. can also 
be grouped by workload (i.e.. Federal admissions). However, the size 
of the intervals into which sample hospitals are categorized will have 
to be chosen somewhat differently in each case. In addition, the size 
of each sample will necessarily differ; optimally, where possible, all 
hospitals/PSROs should be used. 



C. Use of Unit Cost 

Using unit cost rather than total cost for comparing/analyzing data 
is useful because comparing only total costs may lead to erroneous con- 
clusions. Using unit cost takes into account total Federal admissions/ 
discharges over which total costs are distributed. 



-6- 



For example, consider two delegated hospitals: 



Hospital A 
Hospital B 



Total Review 
Costs 

$ 40,000 

$ 7,500 



Number of 
Federal Admissions 

4,000 

750 



Hospital A's review costs appear high while those of hospital B appear 
moderate, yet on a unit cost basis both hospitals have the same review 
costs : 



Hospital A 
Hospital B 



Unit Cost 

$40,000 = $10 per Federal Admission 
4,000 

$ 7,500 = $10 per Federal Admission 
750 



D. Apportionment 

Apportioning reported cost figures is necessary in order to obtain truly 
accurate data. It was necessary to apportion in order to analyze both 
delegated and nondelegated review costs. For the analysis of delegated 
review costs, it was necessary to apportion in order to identify review 
costs for Federal patients in delegated hospitals with Federal and non- 
federal combined review programs. 

Example (Refer to sample HCFA 153 form - page 8) 
In cases where the "Scope of Review" on the HCFA 153 is marked 
"Federal and Nonfederal Combined Review Program," review costs 
must be apportioned among Federal and nonfederal patients. The 
method for apportioning costs is shown below. For any information 
desired for Federal admissions, multiply the appropriate figure 
from form 153 by the figure obtained in step 2 below. This product 
reflects the Federal portion of combined Federal and nonfederal 
review costs. 

Step 1--Find the total number of admissions by adding the number 
of Federal and nonfederal admissions. 

Step 2--Divide the number of Federal admissions by the number of 
total admissions to obtain a figure. 

Step 3--Multiply the appropriate figure from form 153 by the figure 
obtained in step 2 above. 

For instance, to calculate the cost of review coordinators for 
concurrent review since the "Scope of Review" section specifies 
this sample hospital has a "Federal and Nonfederal Combined Review 
Program" : 



step 1- 



-a) Title XVIII + Title XIX + Title V admissions 



= 1,490 + 6,535 + 

= 8,025 Federal admissions 

b) Federal + nonfederal admissions 

= 8,025 + 4,046 

= 12,071 (total admissions) 

Step 2--Federal admissions 4- total admissions 

= 8,025 
12,071 

= .6648165 

Step 3--Cost of review coordinators for concurrent review (col 3, 
line 4) is $94,032. However, this cost is for the review 
of the total admissions. 

Thus, .6648165 x $94,032 = $62,514,025 or, rounding, $62,514 
Consequently, $62,514 is the cost of review coordinators 
for concurrent review of only Federal admissions. 

In the analysis of both delegated and nondelegated review costs, it 
is necessary to apportion in order to identify the number of full- 
time equivalent (FTE) review coordinators corresponding to concurrent 
review. An example of this calculation can be found on page 19. 

In analyzing areawide costs (Part III), it is necessary to apportion 
the review coordinator FTEs in order to identify what portion of the 
total review coordinator staff is employed in the performance of area- 
wide review activities. 



DELEGATED HOSPITAL FUNCTION COST SUMMARY 317^^3° l/t^^^^ 



1 . Provider Name: 

2. Medicare Provider Number □ □-□ □ □ □ 

3. Check if Hospital Reimb. by PSRO □ 

4. PSRO Name: 



5. PSRO Number: 



6. Delegation Status: 

a. X Fully Delegated (CR and MCEs) 

b. Delegated CR only 

c. — Delegated MCEs only 

d Delegated MCEs and Partially CR 

Delegated Partial CR only: 

e. _Ptiysician Advisor 

f. —Review Coordinator 



7. Scope of Review: 

a. _Federal Only 

b. KFederal and Nonfederal Combined 

Review Prograrti 

c. _Federal and Nonfederal 

Separate Review Program 

8. Reporting Period: 

From: July 1, 1978 
To: June 30, 1979 



9. 



ADMISSIONS 



Category 



a Title XVIII 
bTltleXIX 
c Title V 
d Nonfederal 
e Totals 



(1) Acute 



(2) SNF 



(3) ICF 



^^^^^ 



(4) Totals 



1,490 



6,535 



4,U4b 



12.071 



10. If Modified Revievif 
(describe briefly) 



1 1 . Type of Submission (cfieck one) 



a. 


% 


. . . Estimated 


b. 




Actual 


c. 








13. Cost Per Admission Certification/ 
Continued Stay Concurrent Review 



14. TOTAL COST PER ADIWIISSIGN $ -^^ 



Administrator 



Date 



HCFA 153 8/79 

•, ri:t'''" ■- I,/ Ih/v ''i<.-'.ti',r, I 1 6 'j h Pi 9i'-60'i/ 

fhi '^'f: '0 'hO'jf rr,^/ f.i-jntntjutf: If, (li:!<i'il ol f^'tHO uirilrocl/cjfsfit n.nf.-wnl 



16. 



PSRO Executive Director 



Date 



-9- 



E. Use of Rank Order 

Arranging unit costs in order from high to low enables data to be more 
easily examined for comparison and contrast. Ideally, it is important 
that only commensurate data be ranked together and compared/contrasted. 
For example, caution should be exercised in ranking delegated hospital 
concurrent review physician advisor unit costs with the unit costs of 
physicians in areawide review. If total sample subgroups are utilized 
in examining data, it is helpful to rank order unit costs both within 
siabgroups and within the entire sample of delegated hospitals/PSROs. 

F. Use of Measures of Central Tendency: Range, Mean, Median, and Mode 

Using some of the basic statistical measures of central tendency is 
extremely helpful in examining unit costs of groups of PSROs/delegated 
hospitals. A brief review on calculating measures of central tendency 
follows: 

1 . Range 

The range of a group of quantities is the difference between the 
highest quantity (the high) and the lowest quantity (the low). The 
range is usually not an ideal statistic for critical evaluation of 
very large samples because the range is influenced by extreme values. 
However, sometimes use of the range is very helpful. For example, 
it is often satisfactory for examining samples of less than ten. To 
find the range of a group of unit costs: 

Step 1--Determine the highest and the lowest unit costs. If the 
unit costs are rank ordered, the high and low are clearly 
evident. 

Step 2--Subtract the low from the high. The difference is the range. 

2. Mean 

A mean is merely an arithmetic average. It is the most commonly used 
and, in many cases, the "best" measure of central tendency. Some sets 
of unit costs contain costs that are atypically high or low. In such 
cases, the mean, which is affected by all extremes, is not the most 
informative measure. To find the mean of a group of unit costs: 

Step 1--Find the sum of all the unit costs in the group. 

Step 2--Divide the sum (figure obtained in step 1) by the number 
of unit costs in the group. The figure obtained is the 
mean. 



-lo- 



in situations where there are one or two numbers that are signifi- 
cantly higher or lower than the others, it may also be advisable to 
compute a mean excluding these "outlier" figures. 

3. Median 



A median is the midpoint of a group of rank ordered quantities. 
When data are distributed somewhat evenly, the mean and median will 
be nearly equal. Thus, the mean and median of a group of unit costs 
should be compared. The method of finding a median of a group of 
unit costs differs depending on whether there is an odd or an even 
number of unit costs in the group. 

To find the median of a group of unit costs if there is an odd 
number of unit costs in the group: 

Step 1 — Rank order the unit costs from high to low. 

Step 2--Determine the unit cost which is the midpoint of the group. 
This unit cost is the median. 



Example 

Find the median of the following PSRO concurrent review 
travel costs: $.15, $.13, $.90, $.25, $1.78, $.13, $.03 

There is an odd number of unit costs. 



Step 1--Rank order the unit costs from high to low. 

(1) $1.78 

(2) .90 

(3) .25 

(4) .15 

(5) .13 

(6) .13 . 

(7) .03 



Step 2--Determine the unit cost which is the midpoint of the group. 
The median is $.15. 

To find the median of a group of unit costs if there is an even 
number of unit costs in the group: 

Step 1--Rank order the unit costs from high to low. 

Step 2--Determine the two unit costs (considered as one point) which 
are the midpoint of the group. 



-11- 



Step 3--Find the average of the two unit costs identified in step 2. 
This average is the median. 

Example 

Find the median of the following PSRO concurrent review 
costs: $12.00, $6.58, $6.75, $3.25, $4.15, $5.50, $12.00, 
$4.00 

There is an even number of unit costs. 

Step 1 — Rank order the unit costs from high to low. 



(1) 


$12.00 


(2) 


12.00 


(3) 


6.75 


(4) 


6.58 


(5) 


5.50 


(6) 


4.15 


(7) 


4.00 


(8) 


3.25 



Step 2 — Determine the two unit costs (considered as one point) which 

are the midpoint of the group. These costs are $6.58 and $5.50. 

Step 3--Find the average of the two unit costs identified in step 2. 
Thus, find the average of $6.58 and $5.50. 

$6.58 + $5.50 = $12.08 

$12.08 = $6.04 
2 

Therefore, $6.04 is the median. 

4. Mode 

The mode is the most frequently occurring value in a group of data. 
Usually, in smaller samples, the mode will have little value in 
evaluating data. 

To find the mode of a group of unit costs: 

Step 1 — Arrange the unit costs in rank order from high to low. 

Step 2 — Examine the unit costs to determine the most frequently 

occurring cost. If there are two sets of unit costs which 
are equally represented in the group, the data are said to be 
bimodal; if three sets, trimodal, etc. 



-12- 



Format of Analysis 

The analysis is divided into: a) delegated, b) nondelegated, and 
c) areawide review costs. The delegated review cost analysis centers 
on concurrent review and its major components, review coordinator and 
technical/ support costs, and on MCE costs per patient and per study. 
A similar analysis follows on nondelegated review costs. The analysis 
of areawide costs concentrates on monitoring and data activities. 

Information is presented in the following format: 



1. Tables Presenting Data by Topic 

2. Rationale 

3. Purpose of the Table 

4. Data Source 

5. Method of Calculation 

6. Purpose of Calculation (when necessary) 

7. Analysis of Data (Indications) 



For purposes of this analysis the terms "admissions" and "discharges" 
refer to the numbers shown on the HCFA 153 and 121 respectively. When 
used in the context of review workload or productivity, the terms are 
referring to both components of concurrent review (i.e., admission and 
continued stay review) . 



-13- 



. Delegated Review Costs 
Table I - Range of Delegated Hospital Review Unit Costs by Hospital Size 
Rationale 

Because of the wide variation in both PSRO and delegated hospital review 
costs, delegated hospital review costs were examined at the hospital 
level with hospitals being grouped according to Federal admissions. Even 
within these six groups, a wide range of review costs is evident. It is 
apparent that in most of the hospitals whose costs were examined, concur- 
rent review is the greater expense of total hospital delegated review. 

Purpose of the Table 

To provide an overview of delegated hospital review unit cost by hospi- 
tal size. Review costs (total, concurrent review, MCEs) by hospital size 
can be contrasted/compared for differences and similarities. Also, the 
cost relationship between concurrent review, MCEs, and total cost can be 
more easily identified. 

Explanatory Note 

The unit costs under consideration (total hospital delegated, concurrent 
review costs, and Medical Care Evaluation studies costs) were examined 
for each delegated hospital in each sample size group. However, for 
brevity, the unit costs of only five delegated hospitals in each sample 
size group are shown in Table I. 

Ranking in Table I is done on the basis of "total hospital delegated 
review" unit costs (column 3). For each hospital size group the highest 
total hospital delegated review unit cost shown is the highest unit cost 
of all the delegated hospitals in the entire sample. 

Similarly, for each sample size group the lowest total hospital review 
unit cost shown is the lowest unit cost of all delegated hospitals in 
the sample size group, not just of the five hospitals shown on the table. 

The middle unit cost of each sample size group is the median unit cost of 
all hospitals in the group. 

Example 

For all the delegated hospitals in sample group B, $15.44 is the 
highest "total hospital delegated review" unit cost, and $4.72 is the 
lowest unit cost. The median unit cost of all the delegated hospitals 
in sample group B is $9.49. 

Data Source 



HCFA 153 



-14- 



Table I 

Range of Delegated Hospital Review Unit Costs* By Hospital Size 

Unit Costs 

Total Hospital Concurrent Medical Care 

PSRO Hospital Delegated Review Review Evaluation Studies 



Group A (under 1,000) 

1 Al $ 32.53 $ 19.02 $ 13.50 

2 A23 23.10 20.36 2.74 

3 A19 11.95 8.81 3.14 

4 A12 7.41 5.60 1.81 

5 A8 4.74 3.64 1.10 



Group B (circa 1,000) 

1 B26 16.44 11.99 4.45 

2 BIO 12.01 11.30 .71 

3 B5 9.49 9.01 .48 

4 87 6.88 5.86 1.02 

5 B22 4.72 3.78 .94 



Group C (circa 2,500) 

1 C14 17.39 14.60 2.79 

2 CI 12.74 11.40 1.34 

3 Cll 10.46 9.09 1.36 

4 C8 7.02 6.38 .64 

5 C13 6.03 5.85 .18 



Group D (circa 4,000) 

1 D7 26.74 20.49 6.26 

2 D5 19.03 17.14 1.88 

3 D2 10.59 9.72 .87 

4 D18 4.63 2.75 1.87 

5 D14 2.71 2.56 .43 



Group E (circa 6,000) 

1 E7 20.94 9.02 11.91 

2 E3 16.47 13.46 3.01 

3 E6 10.52 9.26 1.25 

4 E8 6.91 ■ 6.61 .30 

5 E20 3.68 3.24 .44 



Group F (circa 10,000) 

1 F2 18.34 • 10.09 8.25 

2 F7 12.92 12.02 .91 

3 F13 12.40 11.19 1.21 

4 F5 7.33 6.49 .84 

5 FIO 6.97 6.90 .06 



number of Federal patients 
Purpose: To provide high, low, and median for each sample group 



-15- 



Table I (Continued) 

Method of Calculation 

■•.TjT ■ total hospital delegated review cost 

total hospital delegated review = r ^ , q — 5—= : 

^ number of Federal admissions 



unit cost 

concurrent review 
unit cost 



MCEs unit cost 



total concurrent review cost 
number of Federal admissions 

total cost of MCEs 

number of Federal admissions 



Analysis of Data (Indications) 

o Unit cost variations exist despite similar hospital review 
workloads . 

o Concurrent review is usually the greater expense. 

o MCEs generally represent 10%-15% of total review costs. 

o Delegated hospital review needs to come in at less than 
$8.70 to allow for Part III costs. 



-16- 



Table II - Major (Unit) Component Costs of Hospital Delegated 
Concurrent Review in Relationship to Total Hospital 
(Unit) Cost by Hospital Size 



Rationale 

As exhibited in Table I , concurrent review costs generally represent the 
major expense of delegated hospital review, and MCE costs usually repre- 
sent a lesser expense. Therefore, the component costs of concurrent 
review were examined in order to determine the significance of each. 

Analysis revealed that the review coordinator and technical/support costs 
represent the major expenses of concurrent review with other cost components 
usually representing only minor expenses. 

Review coordinator and technical/support costs were examined separately 
for each of the six sample size hospital groups. However, only group C 
(circa 2,500 Federal admissions) is shown here. 



Purpose of the Table 

To allow an examination (by hospital size) of the variance and similar- 
ities existing among unit costs of concurrent review and review coordina- 
tor and technical/ support costs within concurrent review. 



Data Source 
HCFA 153 



Method of Calculation 

For concurrent review ; 

review coordinator 
unit cost 

technical/ support 
unit cost 

review coordinator & 
technical/ support 
unit cost 

concurrent review 
unit cost 

total hospital 
review unit cost 



= total review coordinator cost 
number of Federal admissions 

= total technical/support cost 
niunber of Federal admissions 

review coordinator [total cost] + 
= technical/support [total cost] 
number of Federal admissions 

= total concurrent review cost 
number of Federal admissions 

= total hospital review cost 
number of Federal admissions 



o • ■ ■ c 

Table II 

Major (Unit) Component Costs of Hospital Delegated 
Concurrent Review in Relationship to 
Hospital (Unit) Cost by Hospital Size 



Group C (circa 2,500) 


(1) 


(2) 


(3) 


(4) 


(5) 


(6) 


(7) 






Review 


Technical/ 


Review Coordinator 


Concurrent 


Total 






Coordinator 


Support 


& Technical/ Support 


Review 


Hospital 


PSRO 


Hospital 


(Unit) 


(Unit) 


(Unit) 


(Unit) 


(Unit ) 


1 


C14 


(*« T A 1 A 

5 10.19 


5 1 . 57 


$ 11.76 


5 14.60 


<S IT OA 

5 17.39 


2 


C20 


8 .48 


2 . 28 


1 A '^ /• 

10 .76 


1 C 1 o 

15 . 12 


1 C £ 1 

Id . 61 




C19 


7 . 17 


4.28 


11 A f -i- 

11 .46* 


A en 

14 . 56 


15 . 59 


4 


Co 


A CI 

9 . 51 





A CI 

9 . 51 


1 O AC 

13 .05 


1 O AC 

13 . ZD 


5 


CI 


z' 1 A 

6 . 19 


.16 


6 . 35* 


11 A f\ 

11 .40 


1 A '~l A 

12 . /4 


o 


CIZ 


o o c 

8 . 25 





O AC 

8.25 


1 1 AT 

11 . 27 


1 A yl O 

12 . 43 


7 


y-1 O O 

C22 


C A A 

5 . 98 


1 .45 


■T A A ^ 

1 .44* 


1 A AA 

10 . 20 


11 11 A 

11 . 54 


o 
O 


CIO 


3 . 38 


A1 

.97 


4.36* 


c r\ A 

5 .04 


1 A AO 

10 . 92 


9 


C2 


7 . 32 





7 . 32 


1 A A^ 

10 . 25 


1 A 1 f\ 

10 . /o 


10 


C5 


5 . 04 


1 .30 


7 .35* 


1 A AO 

10 . 28 


1 A T 

10 .57 


11 


Cll 


5.45 


2.57 


8.02 


9.09 


10.46 


12 


C7 


3.08 


1.99 


5.08* 


6.99 


10.36 


13 


C9 


3.56 


2.08 


5.65* 


9.37 


10.01 


14 


C15 


4.84 


1.17 


6.01 


8.39 


9.91 


15 


C21 


4.67 


1.69 


6.36 


8.08 


9.45 


16 


C17 


3.78 


.61 


4.40* 


7.62 


7.94 


17 


C4 


2.74 


1.05 


3.79 


6.17 


7.59 


18 


C8 


5.08 





5.08 


6.38 


7.02 


19 


C16 


3.22 


1.29 


4.51 


6.19 


6.65 


20 


C18 


4.33 





4.33 


6.21 


6.53 


21 


C13 


4.77 





4.77 


5.85 


6.03 



In some cases, the sums of the figures in columns three and four do not equal the figures 
in column five because of rounding in calculations. These cases are denoted by asterisks 
beside column five figures. 



-18- 



Table II (Continued) 

Analysis of Data (Indications) 

o Review coordinator costs are usually the greatest cost element 
in concurrent review. 

o Technical/ support costs vary from the high of $4.28 to the low 
of $0. 

o Having zero expenditures for technical/ support indicates instances 
where the review coordinator may be performing the abstracting. 

o It is generally inefficient to use a trained health practitioner 
to perform a clerical function. Alternatives to this practice 
should be explored. 

o Some physician advisor time is "free." 

o In hospitals where the sum of review coordinator and technical/ 
support equals more than $5.00, the total unit concurrent review 
cost often equals more than $8.00. 

o It is necessary to examine both the review coordinator and tech- 
nical/support costs very closely. 



-19- 



Table III - Examination of Review Coordinator Annual Productivity 
by Hospital Size 

Rationale 

Because the unit cost of review coordinators represents the major portion 
of concurrent review expense, review coordinator productivity (i.e., work- 
load per FTE review coordinator) was examined. This examination was per- 
formed to discern similarities and/or differences among delegated hospitals 
within the same and different sample groups and to account for existing 
differences in review coordinator unit cost. 



Purpose of the Table 

To compare and contrast, by means of high- to-low rank orderings, the 
annual review coordinator productivity levels by hospital sample size 
group . 



Data Source 
HCFA 153 



Method of Calculation 

In order to obtain the annual productivity of one FTE review coordinator 
used in concurrent review, it is necessary to apportion the total review 
coordinator FTEs employed between the number of review coordinator PTEs 
employed in concurrent review and those employed in MCEs or in other 
review. 

The apportionment of review coordinator FTEs is done on the basis of 
cost--the cost of review coordinators in concurrent review as opposed to 
the total cost of all review coordinators employed. 

Part I. To obtain the review coordinator FTE for concurrent review: 



Step 1--Divide the cost of all review coordinators used in 
concurrent review by the total cost of all review 
coordinators employed. 

Step 2--Multiply the figure obtained in step 1 by the total 
number of review coordinator FTEs employed. This 
figure is the review coordinator FTE used in concur- 
rent review. 



Table III 

Examination of Review Coordinator Annual Productivity* 

by Hospital Size 



Hosoital Size- 


C<1 OOOl 

\ A f \J \J \J ' 


i rr 1 000 ^ 

y V_ J. 1 V_ CI ^ f \J\J\J J 




4: , UUU ^ 


^cir Co, D , uuu ) 


/i-'-i»-r'a in Ann \ 




(rrnnn A 

vJ J- W U Ci. 


\J L \-> U LJ O 






uroup Ci 


uroup r 




5895 


5802 


3762 


12691 


6438 


4150 




4620 


3462 


3568 


6554 


4770 


4075 




4230 


3170 


3250 


3007 


4620 


3902 




3360 


3093 


2932 


2970 


4264 


3163 




2880 


3088 


2913 


2917 


4160 


3060 




2088 


2761 


2898 


2810 


4070 


2827 




2000 


2655 


2837 


2523 


3301 


2573 




2000 


2597 


2782 


2275 


3093 


2442 




1670 


2590 


2605 


2162 


3090 


2399 




1566 


2436 


2563 


2128 


3064 


2300 




1564 


2400 


2071 


2026 


3000 


2168 




1504 


2400 


1999 


1954 


2825 


2157 




1376 


2316 


1740 


1949 


2567 


1846 




1120 


2274 


1733 


1798 


2544 






1110 


2146 


1666 


1796 


2187 






1096 


2028 


1625 


1332 


2122 






1031 


1980 


1325 


1312 


1811 






1024 


1860 


1317 




1615 






1020 


1858 


1309 




1530 






969 


1818 


1191 




1 44fi 






873 


1755 


1184 










670 


1737 












561 


1599 












365 


1573 












128 


1571 
1557 
1299 
1144 











Productivity = number of Federal patients 



number of full-time equivalent review coordinators 



-21- 



Table III (Continued) 

Example (of Part I) of apportionment calculation (from sample HCFA 153, P. 22). 

Step 1 — a) Cost of review coordinators used in concurrent review 
is $9,454. 

b) Total cost of all review coordinators employed is 
$10,342. 

Thus- liMlf = -^i^^^" 

step 2--Total number of FTE review coordinators employed is two. 

2 K (.9141365) = 1.828273 or, rounding, 1.83 

Therefore, 1.83 FTE review coordinators are used to do 
concurrent review. 

Part II. Annual productivity** of one annual number of Federal admissions 

FTE review coordinator used = number of FTE review coordinators 
in concurrent review used in concurrent review 

** This annual productivity is, of course, an "average" productivity. 
Individual review coordinators within a hospital may have higher 
or lower productivity levels than the average figure. However, 
such variations from the average will most likely not be extreme. 

Example (of Part II) (from sample HCFA 153, p. 22). 

Number of Federal admissions is 2,650. 

number of Federal admissions = f^|§ 

number of FTE review coordinators 
used in concurrent review 

= 1448.0874 or, rounding, 1448 

Annual productivity of one FTE review coordinator for concurrent 
review is 1,448 (admissions) in this delegated hospital. 

Analysis of Data (Indications ) 

o There exists considerable overall variation in review coordinator 
productivity levels. 

o A significant number of productivity levels exceeded the earlier 
expectation of 1,800-3,000 admissions (Transmittal No. 46, p. 15). 



o Hospitals with less than 1,000 Federal admissions often have prob- 
lems with maintaining reasonable productivity. 



Category 


(1) Acute 


(2) SNF 


(3) ICF 


(4) Totals 


a Title XVIII 
b Title XIX 
c Title V 
d Nonfederal 
e Totals 








1,675 








975 








-0- 






Vyyyyyy. 


4.710 








7.360 



DELEGATED HOSPITAL FUNCTION COST SUMMARY Appova, no ee r 0097 



Approval Expires 12/81 



1 . Provider Name: 

2. Medicare Provider Number □ □-□ □ □ □ 

3. Check if Hospital Reimb. by PSRO □ 

4. PSRO Name: 



5. PSRO Number: 



6. Delegation Status: 

a. X Fully Delegated (CR and MCEs) 

b. — Delegated CR only 

c. — Delegated MCEs only 

d Delegated MCEs and Partially CR 

Delegated Partial CR only: 

e. _Ptiysician Advisor 

f. —Review Coordinator 



ADMISSIONS 



7. Scope of Review: 

a. -Federal Only 

b. —Federal and Nonfederal Combined 

Review Program 

c. ^Federal and Nonfederal 

Separate Review Program 

8. Reporting Period: 

From: July 1, 1978 
To: June 30, 1979 



10. If Modified Review 
(describe briefly) 



1 1 ■ Type of Submission (c fieck one) 

X 



-Estimated 
. Actual 
.Reconciled 




13. Cost Per Admission Certification/ 
Continued Stay Concurrent Review 



14. TOTAL COST PER ADMISSION 



5 10.01 



HCFA 153 8/79 

f^.iurt' to ft'P':Ft may ")t,Uibinf: tr, rifnuil ot PSfK) nnnUm 1 /qr.Int r' ri'-w.il 



15. 



16. 



Administrator 



Date 



PSRO Executive Director 



Date 



-23- 



Table IV - Unit Cost per Patient as a Factor of Review Coordinator 

Salary Level and Productivity (Delegated Concurrent Review) 



Rationale 

Analysis of data shows that generally when the unit cost of concurrent 
review is greater than $5.00, the unit cost of total hospital deliii 
gated review tends to be greater than $8.00. Thus, because the unit 
cost of review coordinators is the major expense of concurrent review, 
and because of the wide variance of review coordinator productivity, 
review coordinator unit cost was examined as a function of both the 
review coordinator salary and productivity levels. 

On closer examination of all the data, those delegated hospitals which 
incurred concurrent review costs in the $5.00 range had expended a unit 
cost of approximately $3.00 for review coordinators. It was as a result 
of these observations of PSROs' and delegated hospitals' actual review 
expenditures that a $3.00 unit cost target for review coordinators was 
selected. It was with the selection of the $3.00 target that the devel- 
opment of a model began. References to target unit costs refer to 
further delineation of the model. 



Purpose of the Table 

To illustrate the way in which the unit cost for review coordinator ^ 
concurrent review activities is affected by review coordinator pro- 
ductivity and salary level (based on 248 working days per year and 
100% review). For example, in order for the unit cost of review 
coordinator concurrent review activities to equal $3.00, the review 
coordinator paid $12,000 per year will have to review 4,000 admissions 
per year; at $15,000, 5,000 per year; at $18,000, 6,000 per year. 



Data Source 



HCFA 153 



-24- 



Table IV 

Unit Cost Per Patient as a Factor of Review Coordinator 
Salary Level and Productivity 
(Delegated Concurrent Review) 



Purpose: ■ This table shows how review coordinator productivity and 
salary level affect unit cost. 



Productivity 
Per Year Per Day 



Unit Cost at 
$12,000 Salary 



Unit Cost at 
$15,000 Salary 



Unit Cost at 
$18,000 Salary 



1500 


6.0 


2000 


8.1 


2500 


10.1 


3000 


12.1 


3500 


14.1 


4000 


. 16.1 


4500 


18.1 


5000 


20.1 


5500 


22.2 


6000 


24.2 



$ 8.00 
6.00 
4.80 
4.00 
3.42 

— 3.00- 
2.66 
2.40 
2.18 
2.00 



$ 10.00 
7.50 
6.00 
5.00 
4.28 
3.75 
3.33 

3.00- 



2.72 
2.50 



$ 12.00 
9.00 
7.20 
6.00 
5.14 
4.50 
4.00 
3.60 
3.27 

3.0Q_ 



Line demarks the productivity and/or salary levels needed to achieve the target 
review coordinator unit cost of $3.00. 



-25- 



Table IV (Continued) 



Method of Calculation 
Part I . Productivity 
review coordinator 

productivity = annual productivity (see Part II, method of 

(per day) 248 days Table III, p. 21) 



Part II. Annual Salary Level 

Annual salary level is the annual salary actually paid to one FTE 
review coordinator doing concurrent review. If more than one person 
is employed and if they receive different pay rates based on expe- 
rience, full-time vs. part-time status, etc., then the annual salary 
level found will be an average figure based on a theoretical average 
FTE. For purposes of this analysis, fringe benefits are included as 
a part of total annual salary. 

Find the annual salary level of one FTE review coordinator used in 
concurrent review: 

annual salary of one FTE total cost of review coordinators used 

review coordinator used in = in concurrent review 

concurrent review number of review coordinator FTEs used 

in concurrent review (step 2, Part I, 
method of Table III, p. 19) 



Part III. Unit cost (at 100% review) 

(concurrent review) review _ total cost of review coordinators 

coordinator unit cost number of Federal admissions 



-26- 



Table IV (Continued) 



Example (from sample HCFA 153, p. 27) 
Part I. Productivity 

In order to find the review coordinator productivity per day, the 
annual productivity must first be identified. 

From Part I, method of Table III, page 19, first find the review coordi- 
nator PTEs employed in concurrent review. In this case, there are no 
MCE or "other" review costs shown for review coordinators. Thus, the 
entire cost for review coordinators is for concurrent review. Similarly, 
all 2.22 review coordinator PTEs are utilized in concurrent review. 

Consequently, it is not necessary to prorate the review coordinator 
costs and PTEs between concurrent review and MCEs (or other review). 

Therefore, the review coordinator PTE used in concurrent review is 2.22. 

From method of Table III, Part II, page 21 

annual productivity of annual number of Federal admissions 

one PTE review coordinator = number of FTE review coordinators 

used in concurrent review used in concurrent review 



2750 
2.22 

1238.7387 or, rounding, 1239 



Prom method of Table IV, Part I, page 25 

review coordinator = 
productivity (per day) 




4.9959677 or, 
per day) 



rounding, 5 (discharges 



From method of Table IV, Part II, page 25 

annual salary level of one 

FTE review coordinator used = 

in concurrent review 



number of review coordinators PTEs used 
in concurrent review 

$33000 
2.22 



total cost of review coordinators used 
in concurrent review 



$14864.864 or, rounding, $14865 



DELEGATED HOSPITAL FUNCTION COST SUMMARY ZlTeZtT.'^T''""' 



1 . Provider Name: 

2. Medicare Provider Number □ □-□ □ □ □ 

3. Check if Hospital Reimb. by PSRO □ 

4. PSRO Name: 



5. PSRO Number: 



6. Delegation Status: 

a. V^Fully Delegated (CR and MCEs) 

b. - Delegated CR only 

c. — Delegated MCEs only 

d Delegated MCEs and Partially CR 

Delegated Partial CR only: 

e. ^Ptiysician Advisor 

f. — Review Coordinator 



7. Scope of Review: 

a. \/Federal Only 

b. — Federal and Nonfederal Combined 

Review Program 

c. _ Federal and Nonfederal 

Separate Review Program 

8. Reporting Period: 

From: 
To: 



ADMISSIONS 



Category 



a Title XVIII 
bTitleXIX 
c Title V 
d Nonfederal 
e Totals 



(1) Acute 



S,0OO 



\/0,'7S'O 



(2) SNF 



(3) ICF 



(4) Totals 



10. If Modified Review 
(describe briefly) 



1 1 . Type of Submission (c heck one) 

-Estimated 

b Actual 

c Reconciled 



12. COST COMPONENTS 



Adm. Cert./ 
Cont. Stay 
Cone. Review 
$ 




FEDERAL OR COMBINED PROGRAM 
Round to Nearest Dollar 



NONFEDERAL ONLY 



FUNCTIONS 



Medical Care 
Eval. Studies 
$ 



Other 
Review 
$ 



Total 
$ 




Total Other 
Review 
$ 



a. Physicians 



b. Physician Advisors 



c. Other Health Care Prof. 



d Review Coordinators 



e. Technical Support 



^,000 



f. Fringe Benefits 



^, COO 



g. Training 



/OO 



Goo 



h. Travel 



TOTAL 



Jlji>00 



1 3. Cost Per Admission Certification/ 
Continued Stay Concurrent Review 



15. 



14. TOTAL COST PER ADMISSION 



Administrator 



Date 



HCFA 153 8/79 

Fd'iurfi rf;pf,rl mijj r.oritritj'jlf^ f'y rlf.-rnai Of PSf^O ctittttdt.i/iiidnl ii-ttvwitl 



16. 



PSRO Executive Director 



Date 



-28- 



Table IV (Continued) 



From Method of Calculation of Table IV, 

(concurrent review) 

review coordinator = 

unit cost 



Part III, page 25 

total cost of review coordinators used 

in concurrent review 

number of Federal admissions 



$33000 
2750 

$12 



Analysis of Data (Indications) 

o Achieving a set review coordinator unit cost depends on 

both review coordinator productivity level and salary level. 

o Performing review of an average of 12 to 16 patients per day seems 
to be a desirable productivity level. 

o The higher the salary level and/or the lower the productiv- 
ity level, the more difficult it is to achieve a low target 
review coordinator unit cost in a 100% review system (i.e., 
without focusing) . 



-29- 



Table V - Focused Review Costs 



Rationale 

It can be observed from Table IV that without unreasonably high review 
coordinator productivity levels, achieving review coordinator unit costs 
of $3.00* will require focusing by many PSROs. Three dollars is the 
model's guideline review coordinator unit cost figure based on the cur- 
rent nationwide average total review unit cost restraint of $8.70. Some 
PSROs will have to focus even more than would ordinarily be necessary to 
achieve a $3.00 review coordinator unit cost, while in others a higher 
figure than $3.00 might be acceptable. Increasing the productivity and 
decreasing the salary of review coordinators are also possible methods of 
reducing the review coordinator unit cost to $3.00. However, these methods 
have very limited elasticity at the upper and lower limits respectively. 
Focusing can achieve review coordinator unit cost reductions to $3.00 or 
any set level. 



Purposes of the Table 

1) To determine what measure of focusing is necessary in order to 
achieve a set review coordinator unit cost (for concurrent review) at 
given productivity and salary levels. The table emphasizes the model's 
unit cost guideline of $3.00, although any other unit cost could be 
highlighted as well. 

2) To determine the review coordinator unit cost at various focusing 
levels and at given productivity and salary levels. 



Data Source 
HCFA 153 



Method of Calculation 

Part I. To find the necessary focusing levels at given productivity 
and salary levels and at a set unit cost: 

Target review Annual review 
necessary coordinator x coordinator 
focusing level = unit cost productivity level 

annual salary level of one FTE review coordinator 



-30- 



Table V 
Focused Review Costs 



Purpose: This table shows that without unreasonably high productivity 
levels, PSROs will have to focus to achieve a $3.00 review 
coordinator unit cost. 



Federal Patient 










Review Load/ 




$18,000 per year 




Productivity 


% of Federal adnissions reviewed concurrently 


One FTE Review 










Coordinator 


100% 


75% 


50% 


25% 


1,500 


$12.00 


$9.00 


$6.00 


1 $3.00 


2,000 


9.00 


6.75 


4.50 


2.25 


2,500 


7.20 


5.40 


3.60 


1.80 


3,000 


6.00 


4.50 


1 3.00 


1.50 


3,500 


5.14 


3.85 


2.57 


1.28 


4,000 


4.50 


3.37 


2.25 


1.13 


4,500 


4.00 


1 3.00 1 


2.00 


1.00 


5,000 


3.60 


2.70 


1.80 


.90 


5,500 


3.27 


2.45 


1.64 


.82 


6,000 


3.00 1 


2.25 


1.50 


1 .75 



Federal Patient 
Review Load/ 
Productivity 
One FTE Review 
Coordinator 

1,500 
2,000 
2,500 
3,000 
3,500 
4,000 
4,500 
5,000 
5,500 
6,000 



$15,000 per year 
% of Federal admissions reviewed concurrently 



$10.00 
7.50 
6.00 
5.00 
4.28 
3.75 
3.33 

— 3.00- 
2.72 
2.50 



$7.50 



5. 
4. 
3. 
3. 



63 
50 
75 
21 



2.81 
2.50 
2.25 
2.04 
1.88 



50% 

$5.00 
3.75 

—3.00- 
2.25 
2.14 
1.88 
1.67 
1.50 
1.36 
1.25 



$2.50 
1.88 
1.50 
1.25 
1.02 
.94 
.83 
.75 
.68 
.63 



The line denotes the model's guideline review coordinator unit cost 
at various productivity and focusing levels and at a given review 
coordinator salary level. 



-31- 



Table V (Continued) 



Example 1 (using sample HCFA 153, p. 32) 



necessary focusing level 



target review 
coordinator 
unit cost 



annual review 
coordinator pro- 
ductivity level 



annual salary level of one PTE 
review coordinator 



a) the set review coordinator unit cost is $3.00 
(the model's guideline) 

b) annual review coordinator productivity level 
(from the method of Table III, Part II, p. 21) 

number of Federal admissions 



number of PTE review coordinators 
used in concurrent review 



4950 
3 

1650 

c) annual salary level of one PTE review coordinator 
(from the method of Table IV, Part II, p. 25) 

total cost of review coordinators 

_ used in concurrent review 

number of review coordinator PTEs 
used in concurrent review 

$54000 



$18000 

Thus, necessary focusing level = $3.00 x 1650 

$18000 



$4950 
$18000 

.275 or, rounding, .28 

28% (i.e., 72% of the admissions must 

be focused out in this delegated hospital) 



DELEGATED HOSPITAL FUNCTION COST SUMMARY 



OMB Approval No. 66-R-0097 
Approval Expires 12/81 



1. Provider Name: 6. Delegation Status: 

2. Medicare Provider Number □ □-□ □ □ □ a. -Fully Delegated (CR and MCEs) 



3. Check if Hospital Reimb. by PSRO □ 

4. PSRO Name: 



5. PSRO Number: 



b. _ Delegated CR only 

c. —Delegated MCEs only 

d Delegated MCEs and Partially CR 

Delegated Partial CR only: 

e. —Physician Advisor 

f. — Review Coordinator 



7. Scope of Review: 

a. _Federal Only 

b. — Federal and Nonfederal Combined 

Review Program 

c. -Federal and Nonfederal 

Separate Review Program 

8. Reporting Period: 

From: 
To: 



ADMISSIONS 



Category 



a Title XVIII 
b Title XIX 
c Title V 
d Nonfederal 
e Totals 



(1) Acute 



^,000 



900 



9, 9 SO 



(2) SNF 



(3) ICF 



(4) Totals 



10. If Modified Review 
(describe briefly) 



1 1 . Type of Submission (check one) 



a. . 

b. . 

c. . 



.Estimated 

.Actual 

.Reconciled 



12. COST COMPONENTS 



FEDERAL OR COMBINED PROGRAM 
Round to Nearest Dollar 



NONFEDERAL ONLY 



FUNCTIONS 



PTE's 
No. 



Hours 



Adm. Cert./ 
Cont. Stay 
Cone. Review 
$ 



Medical Care 
Eval. Studies 
$ 



Other 
Review 
$ 



Total 
$ 




I 

u> 



Total Other 
Review 
$ 



a. Physicians 



b. Physician Advisors 



c. Other Health Care Prof. 



d Review Coordinators 



e. Technical Support 



t. Fringe Benefits 



g. Training 




h. Travel 



TOTAL 



13. Cost Per Admission Certification/ 
Continued Stay Concurrent Review 



14. TOTAL COST PER ADMISSION 



S 



HCFA 153 8/79 

fa'iv'h '0 ffrporr m^/ cfjmrihulf; to Ohnihl ol PSRO conlinct/ijfant rvnt'wal 



15. 



16. 



Administrator 



Date 



PSRO Executive Director 



Date 



-33- 



Table V (Continued) 
Example 2 

Although the model's review coordinator unit cost target is $3.00, a 
PSRO or delegated hospital may choose to target a different review coor- 
dinator unit cost. Hence the following example: 

a) target review coordinator unit cost is $4.00 

b) annual review coordinator productivity level is 1,500 

c) salary level of one FTE review coordinator is $18,000 

target review annual review 
coordinator x coordinator pro- 
necessary focusing level = unit cost ductivity level 

annual salary level of one FTE 
review coordinator 

= $4.00 X 1500 
$18,000 

= .3333333 or, rounding, .33 

= 33% (i.e., 67% of the admissions 
must be focused out in this 
delegated hospital) 

Part II. To find the review coordinator unit cost at a given focusing 
level and at given review coordinator productivity and salary levels: 

review coordinator _ given given salary level 

unit cost focusing ^ of one FTE review 

level coordinator 

annual review coordinator productivity 
level 

Example 1 

Given: in a delegated hospital, 

a) the focusing level is 50% 

b) annual salary level of one FTE review coordinator is $15,000 

c) annual review coordinator productivity level is 4,000 

given given salary level 

review coordinator = focusing x of one FTE review 

unit cost level coordinator 

annual review coordinator productivity 
level 

= 50% X $15,000 
4000 

$7500 
4000 



$1,875 or, rounding, $1.88 



-34- 



Table V (Continued) 



Analysis of Data (Indications) 

o For the lower end of productivity expectations (i.e., 1,800-2,000), 
it is necessary to focus at around 40% (i.e., 60% of cases exempt 
from review) to achieve the $3.00 target for review coordinator unit 
cost. 

o At the other end of the average productivity expectation (i.e., 
4,000), reaching the $3.00 target requires focusing at about the 
75%-80% level (i.e., 20-25% of cases exempt from review). 

o For a hospital with 3,000 Federal patients, an average size hospital 
in the sample, a focusing level of 50% is necessary to achieve a 
$3.00 review coordinator unit cost. 



-35- 



Table VI - Number of Full-Time Equivalent Review Coordinators Needed for 
Various Admission Levels when Review Coordinator Productivity 
is 2,500 (10.1 reviews per day). 

Rationale 

Because review coordinator unit cost is dependent on review coordinator 
productivity and salary levels, the rate of focusing employed, and the 
number of Federal admissions, examination of those factors led to an 
analysis of their relationships. It should be recognized that "reviews" 
and "admissions" can differ. Unit cost analysis does not take into 
account the number of times a single patient's care is reviewed. Thus, 
10.1 reviews refer to the average number of patients (admissions) whose 
care is reviewed per day. 



Purposes of the Table 

1) To identify the number of PTE review coordinators needed at given 
review coordinator productivity and annual Federal admission levels and 
desired focusing levels. 

2) To identify the focusing levels necessary at given Federal admis- 
sion and review coordinator productivity levels and at a desired number of 
FTE review coordinators. 



Data Source 
HCFA 153 



Method of Calculation 

Part I. To find the number of FTE review coordinators necessary to 
achieve a target review coordinator unit cost: 

number of FTE review number of Federal desired 

coordinators needed = admissions x focusing level 

review coordinator 
productivity level 



-36- 



Table VI 

Number of Full-Time Equivalent Review Coordinators Needed 
for Various Admission Levels When 
Review Coordinator Productivity Is 
2,500 (10.1 reviews per day) 



Number of 
Federal Patients 
Admitted 

Per Year Focusing Levels per Total Admissions 



1,500 
2,000 
2,500 
3,000 
3,500 
4,000 
4,500 
5,000 
5,500 
6,000 



Line A 
Line B 



.25- 
. 50- 



Line C 1.0 



75% 


50% 


40% 


25% 


20% 


1,125 


750 


600 


375 


300 


1,500 


1,000 


800 


500 


400 


1,875 


-1,250 1 


1,000 


625 


500 


2,250 


1,500 


1,200 


750 


600 


2,625 


1,750 


1,400 


875 


700 


3,000 


2,000 


1,600 


1,000 


800 


3,375 


2,250 


1,800 


1,125 


900 


3,750 


2,500 1 


2,000 


-1,250 1 


1,000 


4,125 


2,750 


2,200 


1,375 


1,100 


4,500 


3,000 


2,400 


1,500 


1,200 



Figures above Line A represent focusing/productivity level requiring 
less than 0.25 FTE review coordinator 

Figures at Line B represent 0.50 FTE review coordinator 
Figures at Line C represent 1.0 FTE review coordinator 



-37- 



Table VI (Continued) 



Example 1 

Given: in a delegated hospital 

a) number of Federal admissions is 5,000 

b) desired focusing level is 75% 

c) annual review coordinator productivity level is 2,500 



number of FTE review number of Federal desired 
coordinators needed = admissions x focusing level 

review coordinator 

productivity level 

= 5000 X 75% 
2500 

= 3750 
2500 

1.5 



Part II. To find the focusing level necessary to achieve a target 
review coordinator unit cost: 



focusing level necessary 



desired number of FTE 
review coordinators 



annual review 
X coordinator 
productivity 
level 



number of Federal admissions 



Example 2 

Given: in a delegated hospital 

a) desired number of FTE review coordinators is three 

b) annual review coordinator productivity level is 2,500 

c) number of Federal admissions is 10,000 



focusing level necessary 



desired number of FTE 
review coordinators 



annual review 
coordinator 
productivity 
level 



number of Federal admissions 



3 X 2500 
10,000 

7500 



10,000 
.75 



focusing level necessary 



75% (i.e., 25% of the admissions 
must be focused out) 



-38- 



Table VI (Continued) 



Analysis of Data (Indications) 

o Hospitals admitting between 2,500-3,000 Federal patients (performing 
at the shown productivity levels) and focusing near the 50% level 
can reduce the use of the review coordinator by at least half. 

o In this model, hospitals having fewer than 1,500 Federal admissions 
will need to focus to the 25% level in order to achieve the $3.00 
target. This will mean employing about a 0.15 FTE review coordinator. 

o For hospitals needing less than a 0.25 FTE, the value of performing 
concurrent review is questionable. 

There is a notable difference in the nvmiber of PTEs needed, consid- 
ering the different productivity levels. 

In this model, the only situation in which it appears to be efficient 
(i.e., at desired cost and expected productivity levels) to employ 
a full-time review coordinator is when a hospital admits 5,000 or 
more Federal patients. 



-39- 



Table VII A - Examination of Total (Unit) Technical/Support Costs of 
Hospital-Delegated Review by Hospital Size 



Rationale 

Technical/ support unit costs were examined to determine their relationship 
to review coordinator unit costs. Theoretically, if review coordinators 
are assisted by a great deal of technical/ support staff, then the number 
of admissions reviewed will be at the upper end of the suggested workload 
range (i.e., 3,000 admissions). In large hospitals little or no use of 
technical/ support staff may indicate inefficient utilization of review 
coordinators, while in small hospitals it may be more appropriate for 
review coordinators to perform technical/ support tasks. 

Because of potential reporting inconsistencies on the HCFA 153 forms, 
technical/ support unit costs of both concurrent review and MCEs were 
examined together. Some hospitals recorded all their technical/ support 
costs under concurrent review, while others split their technical/sup- 
port costs between concurrent review and MCEs. 



Purpose of the Table 

To compare and contrast by means of high-to-low rank orderings total 
delegated hospital technical/support unit costs by hospital size. 



Data Source 
HCFA 153 



Method of Calculation 



Total technical/ support 
unit cost 



total technical/ support cost 
number of Federal admissions 



-40- 



Table VII A 

Examination of Total (Unit) Technical/Support Costs 
of Hospital-Delegated Review 
by Hospital Size 



Group A 


Group B 


Group C 


Group D 


Group E 


Group 1 


(< 1000) 


(circa 
1,000) 


(cxrca 
2,500) 


(circa 
4,000) 


(circa 
6,000) 


(circa 
10,000 


$11.54 


$2.85 


$4.35 


$5.38 


$8.30 


$7.32 


3.54 


2.50 


3.91 


5.37 


6.14 


6.63 


2.88 


2.35 


3.41 


3.93 


5.00 


6.09 


2.60 


1.86 


3.08 


3.83 


4.28 


3.13 


2.43 


1.85 


2.69 


3.41 


3.40 


2.94 


2.11 


1.19 


2.31 


3.23 


3.40 


2.79 


1.94 


1.18 


2.09 


2.72 


3.18 


2.53 


1.42 


.99 


2.08 


2.69 


2.62 


2.36 


1.21 


.95 


2.08 


2.09 


2.57 


1.91 


1.21 


.58 


1.90 


1.90 


1.87 


1.40 


.91 


.54 


1.57 


1.69 


1.75 


1.29 


.83 


.51 


1.43 


1.35 


1.04 


1.17 


.79 


.50 


1.30 


1.25 


.87 


.94 


.ol 


. 34 


1 . 


C A 

. 54 






.55 


.31 


.97 


.31 


.49 




.47 


.30 


.50 


.29 


.32 




.29 


.23 


.19 


.16 


.25 




.26 


.18 


.16 


.10 


.14 







.14 


.15 











.12 














.06 













































-41- 



Table VII B - Svimmary of Total (Unit) Technical/Support Costs of Hospital- 
Delegated Review by Hospital Size 



Rationale 

See Rationale, Table VII A, page 39. 



Purpose of the Table 

To provide an overview for comparison/contrast purposes of the high, 
low, range, mean, and median of delegated hospital total technical/ 
support unit cost for each size hospital group and for the entire sample 
group . 



Data Source 
HCFA 153 



Method of Calculation 

See method of Table VII A, page 39. 



Table VII B 

Summary of Total (Unit) Technical/Support Costs of 
Hospital-Delegated Review by Hospital Size 



Hospital Size 
Based on Number 
of Federal 
Admissions 


Number of 
Hospitals 
in Sample 


High 


Low 


Range 


Mean 


Median 


Explanatory Notes Regarding 
Modified Values: A modified 
value is identified by an 
asterisk and parentheses. 


under 
1,000 

Group A 


23 

(17)* 


$ 11.54 
(3.54)* 


$ 
(-26)* 


$ 11.54 
(3.28)* 


$ 1.55 
(1.25)* 


$ .83 
(1.21)* 


Group A: 

Modified values were 
determined by excluding 
the highest cost and costs 


circa 
1,000 

Group B 


26 
(21)* 


2.85 




(.06)* 


2.85 
(2.79)* 


.75 
(.93)* 


.42 

(.54)* 


Groups B and C: 
Modified values were 


circa 
2,500 


21 


4.35 





4.35 


1.69 


1.57 


costs of zero from 
calculations. 


Group C 


(19)* 




(.15)* 


(4.20)* 


(1.86)* 


(1.90)* 


i 


4,000 


18 


5.38 


.10 


5.28 


2.24 


2 .00 




Group D 
















6,000 


17 


8.30 


.14 


8.16 


2.56 


2 .22 




Group E 
















circa 
10,000 


X -J 


7 9 
/ . 




C "3 Q 
O . JO 


O TO 

3 . 12 


2 . 53 




Group F 
















All Groups 


119 
(107)* 


11.54 




(.06)* 


11.54 

(11.48)* 


1.83 
(2.03)* 


1.29 

(1.57)* 


All Groups: Modified values 
were determined by excluding 
costs of zero from calculations. 



Total technical/support costs are those incurred in concurrent review and in Medical Care Evaluation studies 



-43- 



Table VII C - Total (Unit) Technical/Support Costs - Hospital Delegated 
Review [All Groups] 

Rationale 

See Rationale, Table VII A, page 39. 
Purpose of the Table 

To provide a rank ordering of total technical/ support costs for 
comparison/contrast purposes. 

Data Source 
HCFA 153 



Method of Calculation 

See method of Table VII A, page 39. 



-44- 
Table VII C 

Total (Unit) Technical/Support Costs - 
Hospital Delegated Review [All Groups] 



1) 


$11 


54 


(A3) 


32) 


$2 


60 


(A24) 


2) 


8 


30 


(E16) 


33) 


2 


57 


(E6) 


3) 


7 


32 


(F3) 


34) 


2 


53 


(F6) 


4) 


6 


63 


(Fl) 


35) 


2 


50 


(B6) 


5) 


6 


14 


(E5) 


36) 


2 


43 


(A5) 


6) 


6 


09 


(F2) 


37) 


2 


36 


(F7) 


7) 


5 


38 


(D7) 


38) 


2 


35 


(B26) 


8) 


5 


37 


(D3) 


39) 


2 


31 


(C4) 


9) 


5 


00 


(E7) 


40) 


2 


11 


(A19) 


10) 


4 


35 


(C19) 


41) 


2 


09 


(C15) 


11) 


4 


28 


(E3) 


42) 


2 


09 


(D19) 


12) 


3 


93 


(D2) 


43) 


2 


08 


(C21) 


13) 


3 


91 


(CIO) 


44) 


2 


.08 


(C9) 


14) 


3 


83 


(D13) 


45) 


1 


.94 


(A27) 


15) 


3 


54 


(A16) 


46) 


1 


91 


(F9) 


16) 


3 


41 


(C7) 


47) 


1 


.90 


(D4) 


17) 


3 


41 


(D17) 


48) 


1 


.90 


(C22) 


18) 


3 


40 


(E21) 


49) 


1 


87 


(E15) 


19) 


3 


.40 


(E18) 


50) 


1 


.86 


(B5) 


20) 


3 


23 


(D5) 


51) 


1 


.85 


(812) 


21) 


3 


18 


(E14) 




Mean 




22) 


3 


.13 


(F4) 


52) 


1 


.75 


(E2) 


23) 


3 


.08 


(Cll) 


53) 


1 


.69 


(D12) 


24) 


2 


.94 


(F13) 


54) 


1 


.57 


(C14) 


25) 


2 


.88 




55) 


1 


.43 


(C16) 


26) 


2 


.85 


(BIO) 


56) 


1 


.42 


(AlO) 


27) 


2 


.79 


(F12) 


57) 


1 


.40 


(F8) 


28) 


2 


.72 


(D16) 


58) 


1 


.35 


(Dl) 


29) 


2 


.69 


(C20) 


59) 


1 


.30 


(C5) 


30) 


2 


.69 


(D15) 


60) 


*1 


.29 


(FIO) 


31) 


2 


.62 


(E17) 


61) 


1 


.25 


(DIO) 










62) 


1 


.23 


(C17) 



63) 


$1.21 


(A23) 


94) 


$0.29 


(D14) 


64) 


1.21 


(Al) 


95) 


.26 


(A13) 


65) 


1.19 


(B2) 


96) 


.25 


(E8) 


66) 


1.18 


(B17) 


97) 


.23 


(B25) 


67) 


1.17 


(Fll) 


98) 


.19 


(C3) 


68) 


1.04 


(E20) 


99) 


.18 


(B16) 


69) 


.99 


(B4) 


100) 


.16 


(C3) 


70) 


.97 


(CI) 


101) 


.16 


(D6) 


71) 


.95 


(B18) 


102) 


.15 


(C2) 


72) 


.94 


(F5) 


103) 


.14 


(Bl) 


73) 


.91 


(A22) 


104) 


.14 


(Ell) 


74) 


.87 


(E9) 


105) 


.12 


(B13) 


75) 


.83 


(All) 


106) 


.10 


(D9) 


76) 


.79 


(A2) 


107) 


.06 


(Bll) 


77) 


.61 


(A9) 


108) 





(A12) 


78) 


.58 


(B27) 


109) 





(A14) 


79) 


.55 


(A20) 


110) 





(A15) 


80) 


.54 


(B3) 


111) 





(A17) 


81) 


.54 


(D18) 


112) 





(A25) 


82) 


.51 


(B21) 


113) 





(B20) 


83) 


.50 


(B9) 


114) 





(B24) 


84) 


.50 


(C12) 


115) 





(B19) 


85) 


.49 


(E4) 


116) 





(B15) 


86) 


49 


\Ci J 


1 1 7 S 






87) 


.47 


(A4) 


118) 





(C8) 


88) 


.34 


(B22) 


119) 





(C18) 


89) 


.32 


(F13) 








90) 


.31 


(D8) 








91) 


0.31 


(B8) 








92) 


.30 


(B28) 








93) 


.29 


(A8) 









Median 



-45- 



Tables VII A, VII B, VII C 



Analysis of Data (Indications) 
o The mean unit cost is $1.83. 

o There is a vast range in unit technical/ support costs 
with 30% of the sample hospitals incurring less than 
$.50 in technical/ support unit cost. 

o Smaller hospitals may be showing very low technical/ 
support unit costs because the review coordinator may 
be performing those functions. 

o In general, larger hospitals show larger technical/ 
support unit costs. 

For larger hospitals technical/ support unit cost above 
$4.00 seems too high. 



-46- 



Table VIII A - Delegated MCEs Unit Costs by Hospital Size 
Rationale 

MCEs generally do not represent a major component cost of total delegated 
hospital review. The unit costs of MCEs were examined to identify patterns 
of uncharacteristically high MCEs unit costs. 

Purpose of the Table 

To compare and contrast by means of high-to-low rank orderings the unit 
costs of hospital delegated MCEs by hospital sample groups. 

Data Source 
HCFA 153 

Method of Calculation 

unit cost MCEs = total cost of MCEs 

(per patient) number of Federal admissions 



-47- 



Table VIII A 
Delegated MCEs Unit Cost by Hospital Size 

Group A Group B Group C Group D Group E Group F 

(circa (circa (circa (circa (circa 

(< 1,000) 1,000) 2,500) 4,000) 6,000) 10,000) 



$13.50 


$4.45 


$5.88 


11.18 


3.57 


3.36 


9.15 


3.33 


2.79 


7.70 


3.21 


1.52 


5.98 


3.12 


1.44 


5.27 


2.83 


1.40 


3.45 


2.56 


1.38 


3.14 


2.51 


1.36 


2.74 


2.07 


1.34 


2.27 


1.95 


1.16 


2.02 


1.93 


1.03 


1.81 


1.22 


.71 


1.81 


1.12 


.64 


1.42 


1.02 


.64 


1.33 


.94 


.49 


1 .29 


.93 


.46 


1.14 


.87 


.43 


1.10 


.84 


.39 


1.00 


.71 


.32 


.80 


.68 


.21 


.72 


.60 


.18 


.71 


.56 




.18 


.48 






.32 






.14 






.13 





$6.26 


$11.91 


$8.25 


5.52 


9.25 


5.03 


4.85 


3.32 


2.97 


2.52 


3.01 


1.70 


2.39 


2.08 


1.42 


2.05 


1.70 


1.21 


1.88 


1.43 


1.15 


1.87 


1.41 


1.04 


.88 


1.25 


.91 


.87 


1.11 


.84 


.79 


.97 


.65 


.76 


.84 


.12 


.70 


.53 


.06 


.43 


.44 




.43 


.41 




.30 


.37 




.12 


.30 




.08 


.21 




.07 







-48- 



Table VIII B - Summary by Hospital Groups of Delegated MCEs Unit Costs 



Rationale 

MCEs unit costs vary within the selected groups as shovm by the means, 
medians, and modes. In addition to analyzing MCEs unit cost per patient, 
the costs of MCEs were also examined from another perspective, cost per 
study, because such analysis can identify high MCEs costs not readily 
discernable otherwise. Previous HCFA examination of MCEs cost per study 
has shown that MCEs each cost between $400 and $600. Furthermore, some 
hospitals may have done less than the number of MCEs required. If so, 
their costs per study in Table VIII B are deflated. 



Purpose of the Table 

1) To provide an overview of the high, low, range, mean, and median 
for hospital delegated MCEs unit costs by hospital size group. 

2) To illustrate, for purposes of contrast and comparison, the high, 
low, and mean of the per study MCEs cost by hospital sample size group. 



Data Source 
HCFA 153 



Method of Calculation 

unit cost MCEs = total cost MCEs 

(per patient) number of Federal admissions 

MCEs cost = total cost MCEs 

(per study) number of studies required* 



Based on the number of total hospital discharges. 



Table VIII B 

Svimmary by Hospital Groups of Delegated MCEs Costs 



Hospital Size 
Based on Number of 


Number of 
Hospitals in 




Unit MCE 
Federal 


Costs per 
Admissions 






Per Study 


Federal Admissions 


Sample Size 


High 


Low 


Mean 


Median 


High 


Low 


Mean 


Under 
1,000 
Group 


A 


23 


$13.50 


$0.18 


$3.46 


$1.81 


$1,034 


$25.00 


$336 


Circa 
1,000 
J^roup 


B 


26 


4.45 


0.13 


1.58 


1.02 


1,038 


23 .00 


348 


Circa 
2,500 
Group 


C 


21 


5.88 


0.18 


1.29 


0.71 


2,333 


DU . uu 


ID J. 


Circa 
4,000 
Group 


D 


19 


6.26 


0.07 


1.72 


0.87 


2,139 


29.00 


755 


Circa 
6,000 
Group 


E 


18 


11.91 


0.21 


2.25 


1.11 


5,661 


137.00 


1,436 


Circa 
10,000 
Group 


F 


13 


8.25 


0.06 


1.95 


1.04 


7,829 


57.00 


2,150 



I 

-50- 



Table VIII C - Delegated MCEs Unit Costs [All Groups] 
Rationale 

See Rationale, Table VIII A, page 46. 
Purpose of Table 

To illustrate for purposes of contrast and comparison the unit MCEs 
costs of all delegated hospitals in the total sample regardless of size. 

Data Source 
HCFA 153 

Method of Calculatio n 

unit cost MCEs 
(per patient) 



total cost of MCEs 

number of Federal admissions 



-51- 



Table VIII C 
Delegated MCEs Unit Cost [All Groups] 



1) 




/ 7k 1 \ 

(Al) 


31) 


$2.51 


(815) 


61) 


$1 .16 


(C12)** 


91) 


$0.64 


(C8) 


2) 


11 .91 


/■en \ 

(E7) 


32) 


2.39 


(D17) 


62) 


1.15 


(F12) 


92) 


.60 


(828) 


3) 


11 1 o 

11 . lo 


(A3) 


33) 


2.27 


(A4) 


63) 


1 .14 


(All) 


93) 


.56 


(82) 


4) 


n o c 

9 , 25 


(E5) 


34) 


2 .08 


(E5) 


64) 


1.12 


(83) 


94) 


.53 


(Ell) 


5) 


Q 1 C 

y . Id 


(A25) 


35 ) 


2 .07 


(827) 


65) 


1.11 


(E2) 


95) 


.49 


(C20) 


t \ 
d) 




(F3) 


35) 


2 .05 


(Dll)* 


66) 


1.10 


(A8) 


96) 


.48 


(85) 




7 . 70 


(A17) 


37) 


2.02 


(A27) 


67) 


1 .04 


(F6) 


97) 


.46 


(C16) 


8) 


o . 


(D7) 


O O \ 

38) 


1 .95 


(89) 


68) 


1.03 


(C19) 


98) 


.44 


(E20) 






/ Til c \ 

(A16) 


o ri \ 

39) 


1 .93 


(812) 


69) 


1 .02 


(87) 


99) 


.43 


(C2) 


10) 


C Q O 

. oo 


/ 1 A \ 

(CIO) 


40) 


1 .88 


(D5) 


70) 


1.00 


(A15) 


100) 


.43 


(D8) 


1 1 \ 
11) 


C CO 

. DZ 


/ni c \ 

(D15) 


41) 


1 .87 


(D18) 


71) 


.97 


(E21) 


101) 


.43 


(D14) 


12) 


D . ^ / 


(AlO) 


42 ) 


1 .81 


(A12) 


72) 


.93 


(84) 


102) 


.41 


(E13) 


1 ■J \ 
13) 


c no 


(F2) 


43) 


1 . 81 


(A22) 


73) 


.91 


(F7) 


103) 


.39 


(C5) 


14) 


4 . 85 


/no \ 

(D3) 


44) 


1 .70 


(E14) 


74) 


.88 


(D19) 


104) 


.37 


(E16) 


15) 


4.4D 


(B25 ) 


45) 


1 .70 


(F9) 


75) 


.87 


(817) 


105) 


.32 


(C18) 


16) 


J . D / 


(B19) 


46) 


1 .52 


(C15) 


76) 


.87 


(D2) 


106) 


.32 


(86) 


17) 


3 .45 


(A5) 


47) 


1 .44 


(C22) 


77) 


.84 


(E19) 


107) 


.30 


(D13) 


18) 


3 . io 


(C7) 


48) 


1 .43 


(E17) 


78) 


.84 


(F15) 


108) 


.30 


(E8) 


1 Q^ 

L'i) 






J 


1 AO 


(Ali) 


/y ) 


O A 

. 84 


(824) 


109) 


. 21 


(E9) 


20) 


3.32 


(F3) 


50) 


1.42 


(F4) 


80) 


.80 


(A24) 


110) 


.21 


(C3) 


21) 


3.21 


(Bl) 


51) 


1.41 


(E4) 


81) 


.79 


(Dl) 


111) 


.18 


(A14) 


22) 


3.14 


(A19) 


52) 


1.40 


(C4) 


82) 


.76 


(04) 


112) 


.18 


(C13) 


23) 


3.12 


(B18) 


53) 


1.38 


(C21) 


83) 


.72 


(A20) 


113) 


.14 


(816) 


24) 


3.01 


{E18) 


54) 


1.36 


(Cll) 


84) 


.71 


(A9) 


114) 


.13 


(813) 


25) 


2.97 


(Fl) 


55) 


1.34 


(CI) 


85) 


.71 


(BIO) 


115) 


.12 


(Fll) 


26) 


2.83 


(B6) 


56) 


1.33 


(A6) 


86) 


.71 


(C17) 


116) 


.12 


(D9) 


27) 


2.79 


(C14) 


57) 


1.29 


(A2) 


87) 


.70 


(D6) 


117) 


.08 


(D12) 


28) 


2.74 


(A23) 


58) 


1.25 


(E6) 


88) 


.68 


(BID 


118) 


.07 


(DIO) 


29) 


2.56 


(825) 


59) 


1.22 


(821) 


89) 


.65 


(F8) 


119) 


.06 


(FIO) 


30) 


2.52 


(D16) 


60) 


1.21 


(F13) 


90) 


.64 


(C9) 









* Mean 

* Median 



-52- 



Tables VIII A, VIII B, VIII C 



Analysis of Data (Indications) 

The mean MCEs unit cost is $2.05 and the median is $1.16. 

o In the model, a hospital performing concurrent review for 
approximately a $5.00 unit cost ($3.00 for review coordinator 
and $1.80 to $2.00 for technical/ support and physician advisor) 
leaves $1.45 for MCEs. 

o In the sample, 62% of the hospitals incurred costs of $1.45 or 
less. 

o MCEs unit costs in the smallest hospital group have a higher 
mean and median than other groups. This is probably due to the 
fact that costs are spread over a smaller number of patients. 

In each of the sample groups, the median figure is more 
descriptive than the mean because the mean is affected by a 
few cost extremes. 

o Table VIII C shows less variation in MCEs costs than is seen 
in the analysis of concurrent review. 

o It is somewhat difficult to explain how some of the very high 
costs per study are occurring. This may be an area to monitor. 

It is useful to analyze MCEs cost per study in addition to 
the per unit for Federal patient, since the division of the 
expenses over a large number of Federal admissions may mask 
some questionable costs. 

o It was noticed, particularly in some large hospitals, that high 
costs per study contained high technical/ support unit costs. 
In each case, high technical/ support unit cost was also seen in 
concurrent review. This is worthy of note since most large 
hospitals use abstracting services, a cost reimbursed under G&A. 



-53- 



VII. Nondelegated Review - Part II Costs 
Introduction 

The fxmdamental purpose of the following analysis of nondelegated review 
costs is to examine unit concurrent review and unit MCE costs and to 
facilitate comparison with delegated review costs. 

The responsibility and workload for the PSRO performing nondelegated review 
is essentially the same as that for delegated hospital review. Consequently, 
some of the findings in the analysis of delegated review apply to nondele- 
gated review. For instance, review coordinator productivity appears to sig- 
nificantly affect unit review cost whether review is delegated or nondele- 
gated. Furthermore, as focusing needs to be carefully coordinated with a 
reduction in full-time equivalent (FTE) review coordinators in delegated 
hospitals, so also PSROs need to coordinate their planning for focusing with 
the decision on the number of FTEs necessary. 

Our analysis of nondelegated review costs contains an obstacle that could 
not be overcome with available data. Reconsideration costs for denials are 
recorded by PSROs in Part II, yet we were unable to determine either the 
number of reconsiderations handled or the cost of those reconsiderations. 
Reconsideration costs must be isolated in order to accurately determine unit 
cost per patient for concurrent review and MCEs and also to determine and 
evaluate reconsideration costs per case. 



-54- 



Table IX - Nondelegated Review Costs 



Rationale 

Nondelegated concurrent review and MCEs have been thought to be notably more 
costly than delegated concurrent review and MCEs. First, it is essential for 
the program to come to a greater understanding of whether nondelegated review 
is more costly and, if so, to explore the components (review coordinator, 
productivity, technical, or physician advisor) which contribute to that higher 
cost. 

Second, while the question is not resolved by this analysis, OPSRO regional 
offices and PSROs are faced with the challenge to consider whether nondele- 
gated review actually has to cost more than delegated review and how to 
bring nondelegated costs within range of delegated costs. 

In examining nondelegated review costs, the number of discharges was 
obtained from the HCFA form 121. It is necessary to include partially 
delegated hospitals in any analysis of unit costs, but only for those 
components (e.g., concurrent review, or review coordinator, or MCEs) which 
are nondelegated. Column 8 of the new HCFA 121 form clearly delineates 
partially delegated discharges. In future use of that form for unit cost 
analysis, it will be necessary to carefully select the appropriate discharge 
figure. 



Purpose of the Table 

This table sets forth nondelegated review costs for concurrent review and 
MCEs. As with the analysis of delegated review, the important components 
are review coordinator unit cost, review coordinator productivity, unit 
concurrent review unit cost, MCE unit cost, and total review unit cost. 



Data Sources 

HCFA 151 
HCFA 121 



review coordinator 

number of nondelegated discharges 

number of nondelegated discharges 
review coordinator FTE 
for concurrent review 



Method of Calculation 

review coordinator unit cost = 

review coordinator productivity = 



4 



Table IX 
Nondelegated Review Costs 













Concurrent 




Unit 




Number 


Number 


Unit Cost 


Review 


Review 


MCE 


Cost 




of 


of 


Review 


Coordinator 


Unit 


Unit 


Total 


PSRO 


Hospitals 


Discharges 


Coordinator 


Productivity 


Cost 


Cost 


Review 


1 


91 


102,625 


4.99 


2770 


$11.36 


$ .76 


$12.12 


2 


54 


78,066 


3.16 


4132 


5.11 


.57 


5.68 


3 


61 


37,403 


8.58 


1422 


16.49 


1.41 


17.90 


4 


44 


26,100 


5.31 


1589 


10.09 


2.22 


12.31 


5 


40 


42,367 


4.36 


2921 


7.25 


-- 


7.25 


6 


27 


14,030 


12.20 


644 


23.98 


.26 


24.24 


7 


17 


9,051 


5.36 


2852 


8.76 


.20 


8.96 


8 


10 


41,500 


14.10 


2643 


27.77 


.70 


28.47 


9 


7 


7,840 


8.26 


1519 


12.88 


1.20 


14.08 


10 


7 


29,374 


6.75 


2119 


11.36 


.76 


12.12 


11 


6 


28,185 


4.40 


2639 


6.46 


.02 


6.48 


12 


5 


15,753 


4.09 


3150 


5.06 


.09 


5.15 


13 


3 


1,776 


9.57 


1598 


14.46 


1.97 


16.43 


14 


2 


8,184 


5.17 


2211 


9.68 


.52 


10.20 


15 


2 


12,869 


10.73 


964 


15.52 


.48 


16.00 


16 


2 


19,905 


8.25 


1785 


10.14 


.08 


10.22 


17 


1 


5,781 


6.59 


2890 


9.47 


.75 


10.22 


18 


1 


2,769 


2.28 


5538 


3.78 


2.63 


6.41 


19 


1 


673 


10.07 


897 


15.15 




15.15 


20 


1 


443 


15.07 


886 


25.32 




25.32 



-56- 



Table IX (Continued) 

To find review coordinator FTE used in concurrent review, it is necessary 
to apportion. A discussion of apportionment techniques is on page 6. 

Step 1 — Divide the cost of all review coordinators used in concurrent 
review by the total cost of all review coordinators employed 
by the PSRO. 

Step 2 — Multiply the figure obtained in step 1 by the total number of 
FTE review coordinators employed (col. I, line A.l.) by the 
PSRO. The figure obtained is the review coordinator FTE used 
in concurrent review. 



concurrent review = total concurrent review costs 



unit cost number of nondelegated discharges 

MCEs unit cost = total MCEs costs 

number of nondelegated discharges 



total review = concurrent review plus MCEs total costs 

unit cost (part II) number of nondelegated discharges 



Analysis of Data (Indications) • 

o Everything that has been said about how to reduce delegated 
review costs also applies to nondelegated review. 

o Twelve of the twenty PSROs examined had unit review costs of 
approximately $12.00 or less. 

o For these twelve, unit review costs do not seem to be affected 
by the number of hospitals or number of discharges. The PSROs 
selected for study are distributed throughout the country. 



-57- 



Table X - Travel Costs 



Rationale 

Travel costs have often been listed as one of the major reasons why non- 
delegated review is more costly than delegated review. It was largely 
supposed that travel represented a significant expenditure for PSROs. 
PSROs were selected that had sizeable nondelegated review responsibilities, 
were located in rural areas, or were State-wide PSROs, since high travel 
costs have been commonly associated with these types of PSROs. It should 
be noted that while the analysis includes only 20 PSROs, which is not a 
large sample, travel costs were found to be not as significant as previously 
thought . 



Purpose of the Table 

This table displays travel costs on a per patient basis both for concurrent 
review and for the combined concurrent review and MCEs total. 



Data Sources 

HCFA 151 (part II) 
HCFA 121 (discharges) 



Method of Calculation 



Unit cost travel for = total concurrent review travel costs 
concurrent review number of nondelegated discharges 



concurrent review travel costs 

Total unit cost travel = plus MCEs travel costs 

number of nondelegated discharges 



Analysis of Data (Indications) 

o Contrary to previous assumptions, travel costs generally do 
not appear to be a major expense in nondelegated review. 



Travel costs vary on a unit basis. 



-58- 



Table X 

Travel Costs 
Nondelegated Review 



Travel Travel Travel 



Concurrent Unit Cost Total 

Review Concurrent Unit 



PSRO 






Total 
Costs 


Review 


Cost 


1 






$14,837 


$ .15 


$ .17 


2 






9,902 


.13 


.20 


3 






34,345 


.90 


1.00 


4 






6,410 


.25 


.31 


5 






9,511 


.22 


.22 


6 






24,958 


1.78 


1.78 


7 






1,944 


.22 


.22 


8 






1,232 


.03 


.03 


9 






1,385 


.18 


.21 


10 






568 


.02 


.03 


11 






9,903 


.35 


.35 


12 






295 


.02 


.02 


13 






1,542 


.87 


1.05 


14 




• ■ 


144 


.02 


.02 


15 






296 


.02 


.02 


16 






15,649 


.77 


.81 


17 






3,416 


.59 


.71 


18 






178 


.06 


.11 


19 






334 


.49 


1.12 


20 






170 


.38 


.38 



-59- 



Table XI - "Fall Out" PSROs 



Rationale 

In the analysis of nondelegated review costs, certain PSROs incurred costs 
that were significantly different from the range of costs incurred by the 
other PSROs. 

These PSRO costs are displayed on a separate table, not to highlight their 
expenditures but to demonstrate that variant costs should be isolated and 
investigated. Often, as in the case of PSRO No. 2, the subcontract inflated 
the unit concurrent review costs. Followup might reveal that the subcontract 
is not a Part II cost but rather belongs in Part I. Closer examination is 
necessary for all three "fall out" PSROs to decipher legitimate expenditures, 
to identify reporting errors, or to reevaluate the nondelegated review system. 



Purpose of the Table 

The table demonstrates the need to recognize and examine costs which differ 
notably from other PSRO costs and to seek the cause or causes for the 
differences . 



Data Source 



HCFA 151 
HCFA 121 



Method of Calculation 

review coordinator unit cost 
review coordinator productivity 



review coordinator total cost 
number of nondelegated discharges 

number of nondelegated discharges 
review coordinator FTE for 
concurrent review 



Table XI 
"Fall Out" PSROs 



PSRO 


Number 
of 

Hospitals 


Number 
of 

Discharges 


Unit Cost Review 
Review Coordinator 
Coordinator Productivity 


Concurrent 
Review 
Unit 
Cost 


- 

MCE 

Unit 

Cost 


Unit 
Cost 
Total 
Review 


Travel 
Concurrent 

Review 
Total Cost 


Travel 
Unit Cost 
Concurrent 
Review 


Trave 
Total 
Unit 
Cost 


1 


1 


383 


31.45 


1,367 


43.30* 


60.07 


103.37 


1249 


3.26 


12.05 


2 


1 


241 


2.45 




177.63** 


.73 


178.36 


2374 


9.85 


10.58 






688 


79.32 


77 


141.57 




141.57 


184 


.27 


.27 



* In 4th quarter concurrent review unit was $13.30. 

* Subcontract for $37,081 (not for data) shown under concurrent review. 

* Concurrent review unit costs minus this subcontract are $23.77. 

* One quarter estimated based on other three quarters discharges. 



-61- 



Table XI (Continued) 

Analysis of Data (Indications) 

Some of these findings can be explained by three 
possibilities: 

- There could be serious reporting errors; 

- There could be hidden errors in our examination of 
the data; or 

- These could be very unusual activities/costs. 



o In doing similar analyses, the regional Project Officer may 
find it helpful to "flag" aberrant data as was done in 
Table XI. 



-62- 



VIII. Areawide Review - Part III Costs 



Introduction 

The necessity to reduce average per Federal patient review costs includes 
the necessity to reduce areawide costs. Areawide costs are included in the 
negotiated fixed rate for delegated hospital review. Consequently, it is 
necessary to analyze and evaluate the level of areawide spending. PSROs 
need to be aware of the relationship between areawide costs and the fixed 
negotiated rate in planning for activities which are funded as areawide 
costs. 



Major Cost Components in Areawide Costs 

Areawide costs cover three principal program elements. The chief cost is 
PSRO monitoring of the review process in delegated hospitals. This is most 
often monitoring via onsite visits by PSRO personnel. The second cost 
included is for data. This includes the processing of costs and preparation 
of physician and hospital profiles. The third element is costs incurred for 
areawide MCEs and physician costs for criteria development. 

In order to isolate costs, the following determination was made. Monitoring 
costs are equal to total areawide costs less data costs. 

Monitoring = Areawide - data 

For the reporting period covered by the analysis, very few areawide MCEs 
were reported. Consequently, it was assumed that they represented a 
negligible part of areawide costs and no attempt was made to isolate them. 

While physician costs for the development of criteria sets are included in 
areawide costs, preliminary examination showed $.10 per Federal patient 
cost. Once assured that our sample of PSROs did not incur high physician 
costs, we chose not to separate out that portion of monitoring expenses. 
In doing their own analyses, regional offices and PSROs need to scan these 
individual elements for potential problem areas. 



-63- 



Table XII - PSRO Monitoring Costs for Delegated Hospitals 1/n-S/lS 



Rationale 

The cost of monitoring delegated hospitals is an expense the PSRO incurs. 
It involves both onsite visits by PSRO employees and analysis and inter- 
pretation of hospital and physician profiles. To better understand these 
costs, it is necessary to take several perspectives according to the dif- 
ferent workloads: 

- unit cost per Federal patient 

- unit cost per delegated patient 

- unit cost per delegated hospital 

- review coordinator unit cost per delegated hospital 

- technical unit cost per delegated hospital 

- support unit cost per delegated hospital 

The reason the analysis was done both per Federal patient and per delegated 
Federal patient was the potential masking of costs when analysis is done 
solely per Federal patient. The monitoring workload is the delegated Fed- 
eral patient. From another perspective, the monitoring workload is the 
number of delegated hospitals. Consequently, it is necessary to analyze 
monitoring costs from both perspectives. In addition, unit cost analysis 
extends to the principal components of monitoring (e.g., review coordinator 
and technical/support) . 



Purpose of the Table 

This table separates the major cost elements in monitoring (i.e., review 
coordinator and technical/support per delegated hospital basis). It also 
highlights the need to analyze PSRO monitoring costs per Federal patient, 
per delegated Federal patient, and per delegated hospital because of the 
potential for masking in any single line of analysis. 



Data Source 

HCFA 151 
HCFA 121 



The number of delegated hospitals is no longer available on the reviewed 
HCFA 121 form. That number is necessary to perform this type of analysis. 



-64- 



Table XII 

PSRO Monitoring Costs for Delegated Hospitals l/n-Sp^ 

Unit Cost Unit Cost 

Unit Cost Per Per Rev. Coord. Tech. Support 

Delegated Per Delegated Delegated Unit Cost Unit Cost Unit Cost 

Hospitals Fed. Pat. Patient Hospital Per Hosp. Per Hosp. Per Hosp. 



1 


90 


$ 1.12 


$ 1.12 


$ 2,096 


$ 1,024 


$ 241 


$ 142 


2 


57 


1.35 


1.34 


1,863 


913 


242 


105 


3 


48 


4.76 


4.86 


9,575 


2,345 


891 


1,167 


4 


47 


2.53 


2.59 


3,387 


1,498 


805 


416 


5 


33 


.87 


1.45 


3,876 


1,464 


1,249 


1,249 


6 


33 


1.86 


1.86 


7,695 


2,606 


1,567 


333 


7 


29 


2.04 


2.04 


5,716 


2,190 


1,132 


434 


8 


26 


.99 


1.08 


4,113 


1,631 


958 


750 


9 


19 


2.68 


2.86 


7,433 


858 


1,630 


1,172 


10 


17 


2.51 


2.51 


7,321 


4,129 


1,336 


1,475 


11 


16 


3.94 


3.94 


10,194 


3,543 


1,933 


1,389 


12 


15 


5.97 


5.97 


10,233 


2,011 


3,781 


1,406 


13 


15 


2.91 


2.91 


4,592 


2,024 


1,300 


303 


14 


15 


1.58 


1.61 


5,979 


1,679 


2,228 


703 


15 


13 


3.79 


4.04 


12,604 


3,817 


2,422 


821 


16 


14 


2.58 


2.58 


7,764 


2,801 


2,080 




17 


12 


3.32 


3.49 


8,293 


4,302 


3,543 


426 


18 


12 


3.33 


9.54 


11,311 


2,479 


6,444 


432 


19 


11 


2.16 


2.21 


18,172 


2,283 


3,204 


652 


20 


11 


2.39 


2.83 


10,679 


5,903 


4,999 


3,677 


21 


8 


2.21 


2.24 


10,064 


3,381 


4,021 




22 


8 


2.28 


2.28 


6,429 


2,063 


2,063 


1,442 


23 


7 


2.77 


2.77 


11,364 


2,506 


2,883 


1,996 


24 


7 


4.19 


4.19 


12,416 


3,992 


6,439 




25 


5 


2.70 


2.70 


9,856 


4,520 


2,016 




26 


5 


3.34 


24.09 


79,498 


30,222 


29,267 


29,267 


27 


4 


1.55 


6.50 


10,156 


2,163 


493 




28 


2 


2.31 


4.66 


18,685 


917 


3,432 


5,338 


29 


2 


2.44 


5.15 


10,341 


4,352 


4,445 


1,253 


30 


2 


1.03 


15.98 


16,126 


64 


6,466 


5,924 


31 


1 


6.12 


15.36 


73,929 


24,346 


21,700 


8,027 



-65- 



Table XII (Continued) 



Method of Calculation 



^ , , ^-4. total areawide costs minus data costs 

unit cost per Federal patient = r— p — r 

*^ total Federal discharges 



monitoring unit cost per 
delegated Federal patient 



total areawide costs minus data costs 
number of delegated Federal discharges 



monitoring unit cost per 
delegated hospital 



total areawide costs minus data costs 
number of delegated hospitals 



monitoring unit cost review _ total review coordinator costs 
coordinator per delegated number of delegated hospitals 

hospital 



Purpose of this Calculation 

To single out cost of personnel deployed to onsite monitoring activities 
thereby determining its value or efficiency. 



technical unit cost per 
delegated hospital 



total technical costs 

number of delegated hospitals 



support unit cost per 
delegated hospital 



total support costs 



number of delegated hospitals 



-66- 



Table XII (Continued) 



Analysis of Data (Indications) 



o Areawide unit costs are included in the current fixed rate 
of $8.70. 

o In this model, with a $6.45 unit cost set aside for delegated 
hospital review ($5.00 for concurrent review and $1.45 for 
MCEs), $2.25 remains for areawide costs. 

Based on this model, the areawide costs per Federal patient shown 
in this tadjle are now too high. 

o The table shows that some PSROs are spending excessive amounts on 
monitoring and other areawide costs (other than data). 

o PSROs need to adopt more efficient monitoring methods, especially 
greater dependence on data analysis with less onsite monitoring. 

o Areawide unit costs, including data, that exceed $2.25 will leave too 
little funds for concurrent review and MCEs. To the extent PSROs use 
Part III as a "catchall," this problem is exacerbated. 



-67- 



Table XIII - Areawide Review Costs and Their Relationship to the $8.70 
Review Cost Target 



Rationale 

Since areawide costs are included in the negotiated fixed rate for PSRO 
review activities, it is as important to examine the areawide costs as it 
is to examine the cost of concurrent review and MCEs. The PSRO needs to 
evaluate or reconsider its total review system in order to allot its dele- 
gated hospitals sufficient funds to perform review. If both areawide and 
concurrent review/MCEs unit costs are high. Project Officers, PSROs, and 
delegated hospitals need to work closely to reconsider how much review the 
fixed negotiated rate can fund. 

This analysis assumed that since areawide MCEs activity was minimal for 
the time period examined, then monitoring costs equal total areawide costs 
minus data. PSROs performing areawide MCEs will have to separate all 
these costs thoroughly to get an accurate picture of data and monitoring 
costs. 

Lastly, it is necessary to restate that physician costs for setting criteria 
were examined and were found to be $.08-. 10 per patient. This small unit 
cost was not isolated, but PSROs and regional offices need to perform at 
least a preliminary examination on items such as this. 



Purposes of the Table 

1) To analyze the principal Part III costs, data, and monitoring on a 
per patient basis. 

2) To identify the remaining funding available for delegated review 
when Part III unit cost is deducted from $8.70 or the negotiated rate. 
PSROs have to consider the effect their Part III costs have on the allot- 
ment for delegated review. 



Data Source 



Number of discharges: HCFA 121 
Part III cost data: HCFA 151 



-68- 



Table XIII 

Areawide Review Costs and Their Relationship 
To The $8.70 Review Cost Target 



if $8.70, 
then leave 

Total Cost Unit Cost Unit Cost Total Costs 

Discharges Data Data Monitoring Part III for review 



1 


169,911 


87,427 


$ .51 


$1.12 


$1.63 


$7.07 


2 


146,850 


73,245 


.50 


.87 


1.37 


7.33 


3 


136,778 


- 


- 


1.85 


1.85 


6.85 


4 


119,120 


116,090 


.97 


3.34 


4.31 


4.39 


5 


108,308 


48,278 


.44 


.99 


1.43 


7.27 


6 


96,530 


10,711 


.11 


4.74 


4.87 


3.83 


7 


83,318 


28,205 


.34 


2.39 


2.73 


5.97 


8 


81,341 


54,372 


.66 


2.04 


2.70 


6.00 


9 


78,492 


38,784 


.49 


1.35 


1.84 


6.86 


10 


62,892 


2,106 


.03 


2.53 


2.56 


6.14 


11 


55,694 


17,969 


.32 


1.61 


1.93 


6.77 


12 


52,747 


16,512 


.31 


2.68 


2.99 


5.71 


13 


49,405 


31,153 


.63 


2.51 


3.14 


5.56 


14 


43,103 


5,500 


.13 


3.79 


3.92 


4.78 


15 


42,151 


12,002 


.28 


2.58 


2.86 


5.84 


16 


42,018 


11,156 


.27 


2.16 


2.43 


6.27 


17 


41,379 


50,000 


1.21 


3.94 


5.15 


3.55 


18 


38,612 


21,755 


.56 


3.32 


3.88 


4.82 


19 


36,394 


20,190 


.55 


2.21 


2.76 


5.94 


20 


35,341 


29,173 


.83 


1.45 


2.28 


6.42 


21 


31,392 


23,347 


.74 


1.03 


1.77 


6.93 


22 


30,589 


24,548 


.80 


3.33 


4.13 


4.57 


23 


28,693 


23,316 


.81 


2.77 


3.58 


5.12 


24 


26,100 


3,429 


.13 


1.55 


1.68 


7.02 


25 


25,746 


38,090 


1.47 


5.96 


7.43 


1.26 


26 


23,613 


16,753 


.71 


2.91 


3.62 


5.08 


27 


20,712 


6,880 


.33 


4.19 


4.52 


4.18 


28 


18,210 


7,725 


.43 


2.70 


3.13 


5.57 


29 


16,196 


6,362 


.39 


2.31 


2.70 


6.00 


30 


12,075 


7,376 


.61 


6.12 


6.73 


1.97 


31 


9,988 


818 


.08 


2.17 


2.25 


6.45 



-69- 



Table XIII (Continued) 
Method of Calculation 

Data unit cost = data subcontract cost (col. 7, line ID.) 

number Federal discharges (col. 8, line 7C.) 

Monitoring unit cost = (col. 7, line I) minus (col. 7, line D) 

Total areawide cost minus data costs 
Number of Federal discharges 

Total areawide unit = Total areawide costs (col. 7, line I) 

Number of Federal discharges 

If $8.70, then leave for delegated review, 

= fixed negotiated rate ($8.70) - unit areawide costs. 

Comment 

The costs for unit monitoring reflect a monitoring system oriented towards 
onsite visits by PSRO personnel. A more effective monitoring system 
involves a shift from that method to a more data oriented, profile analysis 
effort wherein the PSRO can more accurately oversee whether the hospital's 
review system is properly designed and implemented. Increased reliance on 
data, with its extensive potential for PSROs, is a primary reason why the 
cap on data costs was lifted. With more money available for data and greater 
data demands for monitoring, PSROs may be inclined to consider more complex 
interactive data systems. 

Analysis of Data (Indications) 

Lifting of the cap on data costs (Transmittal No. 85) will facilitate 
better use of data, with PSROs doing more and better profiling. 

o Through data analysis and feedback to hospitals and physicians, PSROs 
can reduce the need for 100% concurrent review and develop alternatives 
to onsite monitoring. 

o Data analysis (profiling) is one of the primary ways to look at patterns 
of practice. 

o Nine of 31 PSROs in the sample show unit areawide costs at or below 
the $2.25 model target. 

o By subtracting a PSRO's areawide costs from its total unit review costs, 
an assessment of how much money is being left for delegated hospital 
review can be made. The last column of the table does this using the 
$8.70 unit review cost target. 



-70- 



Conclusions and Recommendations 

Through the analysis of the cost data and the development of the model, 
several recommendations can be made. The following recommendations may 
be very helpful as PSROs and regional Project Officers consider the costs 
of present activities or prepare for planned modifications in the review 
systems. 

1. In order to meet the average nationwide cost target, many PSROs will 
have to alter their present systems to include focusing and/or other modi- 
fications . 

2. Focusing needs to be coupled with the use of data to examine patterns 
of practice not only to help identify areas for focusing in or out but also 
for monitoring the impact of focused review. 

3. It is important for PSROs to examine their data systems for present 
capabilities and possible improvements. They might also consider how they 
can use their data systems more efficiently. In addition, PSROs, especi- 
ally younger organizations, need to identify other data sources (e.g., 
fiscal agents and hospital data systems) that they can use. 

4. Focusing raises several issues in relation to staffing patterns 
within PSROs and delegated hospitals. Serious consideration should be 
given to the number and types of staff persons required under a focused 
review system. In addition, the duties of staff persons should be 
reevaluated in light of the need for increased reliance on data analysis 
and profiling. Staff reduction/ reorganization may be inevitable. 

5. PSROs should begin to closely examine MCEs in relation to costs per 
study as well as costs per Federal patient. In hospitals with a large 
number of Federal patients, a low per patient cost can mask a high per 
unit cost per study. For example, one delegated hospital ha J a per 
patient cost of $1.25, yet its per study cost was $7,000. ka estimate 
developed by OPSRO in a previous analysis of 32 PSROs shows that MCEs 
cost between $400 and $600 per study. 



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